TRADING  WITH  MEXICO 


TRADING   WITH 
MEXICO 


BY 

WALLACE  THOMPSON 

AUTHOR  OF  "THE  PEOPLE  OF  MEXICO" 


NEW  YORK 

DODD,  MEAD  AND  COMPANY 
1921 


COPYRIGHT  1921 
Br  DODD,  MEAD  AND  COMPANY,  INC. 


PRINTED    IN    THE    U.   8    A.  BY 

Cftc  guinn  &  goben  Company 

BOOK      MANUFACTURERS 


7*7  a 

tfa; 


w 

^ 


TO 

ALBERT  BACON  FALL 

A  Statesman  Whose  Insight  and  Whose 

Knowledge  of  Mexico  Have   Long 

Sustained  the  Faith  of  Those 

Who  Love  Her  Best. 


PEEFACE 

THE  book  whose  pages  follow  is  the  result  of 
a  conviction,  firm-rooted  in  observation  and  ex- 
perience, that  the  American  business  man  prefers 
to  judge  for  himself.  He  wishes  the  facts,  and 
beyond  all  the  fundamental  facts,  and  when  he  has 
them  his  judgment  is  sure,  quick  and  final.  It  is 
to  men  who  think  in  this  way  that  this  book  is 
addressed.  It  is  the  story,  told  as  concisely  as 
the  facts  permit,  of  conditions  as  they  truly  exist 
in  the  great  land  which,  like  a  cornucopia, 
stretches  to  the  south  of  us.  It  is  written  for  the 
business  man  of  the  United  States,  definitely,  with 
such  limitations  as  exist  for  such  a  book — its  value 
to  the  European  may  be  the  greater  because  it 
does  not  seek  to  straddle  the  national  issue. 

I  have  written  other  books  on  Mexico.  One  has 
seen  the  light  of  publication  before  this  volume 
was  written.1  I  have  sought,  in  these  other  vol- 
umes, one  upon  the  people  of  Mexico  and  one  upon 
the  psychology  which  governs  their  actions  in  so- 
cial and  in  business  life,  to  lay  a  solid  ground  for 
the  understanding  of  the  country  and  its  people. 
In  the  book  which  is  offered  here  I  give,  freely, 
openly,  without  apology,  the  facts  of  a  commercial 

i  The  People  of  Mexico.  Harper  &  Bros.,  New  York,  1921.  The 
companion  book,  The  Mexican  Mind,  is  in  preparation  for  pub- 
lication as  this  present  volume  goes  to  press. 

vii 


viii  PREFACE 

situation  which  to  me  is  the  most  astounding  con- 
dition in  the  business  world  to-day.  I  picture,  with 
the  simplicity  of  truth,  a  country  of  vast  natural 
mineral  resources,  but  virtually  no  agricultural 
wealth,  a  country  with  almost  no  consuming  popu- 
lation, a  country  of  radical  governments  which 
have  sought,  frankly,  to  destroy  capital  and  the 
machinery  of  Mexico's  own  wealth.  I  have  told 
but  little  of  the  famous  resources  of  Mexico — 
those  are  described  elaborately  in  many  works. 
I  have  told  little  of  the  labor  of  Mexico,  for  this  is 
yet  to  be  harnessed.  I  have  described  none  of  the 
great  industrial  needs  of  Mexico,  because  those  are 
obvious  to  all  who  run. 

I  have  sought,  rather,  to  set  down  those  phases 
of  Mexican  life  to-day  which  are  the  background 
of  Mexican  business.  I  have  dared — what  no  man 
with  less  faith  in  the  American  business  man 
would  dare  to  do — to  set  forth  honestly  the  truth 
about  Mexicans  of  to-day,  the  secrets  of  Mexican 
government,  the  facts  of  Mexican  "bolshevism," 
the  horrors  of  Mexico's  degeneration  under  the 
rule  of  her  predatory  caciques.  These  to  me  are 
the  fundamentals  of  Mexican  trade,  just  as  they 
are  the  fundamentals  of  Mexican  politics  and  of 
the  life  of  the  Mexican  people  to-day.  I  have 
sought  to  set  them  forth  in  their  relation  to  the 
grave  issues  of  world  trade,  to  set  them  in  their 
relationship  with  the  ways  of  men  in  business  and 


PREFACE  ix 

with  the  ways  of  business  in  its  relationship  to 
human  life. 

I  am  a  friend  of  Mexico,  Few  who  have  writ- 
ten of  her  life  have  been  more  deeply  interested  in 
her  welfare.  I  should  like  to  lay  here  the  foun- 
dations for  a  solution  of  the  Mexican  business 
problem  by  setting  forth  the  unhappy  picture,  ig- 
noring no  detail,  seeking  no  self-deceit,  as  is  too 
often  the  practice  of  those  who  write  on  Mexico. 
I  believe  that  more  will  be  gained,  more  business 
of  a  solid  sort  won,  by  those  who  realize  and  recog- 
nize the  truth  of  conditions  in  Mexico,  than  by 
those  who  deliberately  close  their  eyes  to  those 
conditions. 

Let  us  have  the  truth,  then!  Let  us  face  the 
Mexican  trade  problem  as  it  is,  with  its  vast  po- 
tentialities balanced,  as  they  actually  are,  by  the 
sinister  elements  of  ignorance,  bitter  poverty  and 
racial  conservatism.  Let  us  see  the  problem  while 
we  see  the  golden  goal.  For  this  problem  is  no — 
mere  issue  of  beating  the  British  or  the  Germans 
to  a  thriving  market.  It  is  an  issue  of  bringing 
into  being  the  purchasing  power  of  a  populous 
nation,  which  is  bowed  down  to-day  by  the  horrors 
of  revolution,  of  unthinking  radicalism,  of  na- 
tional degeneracy.  He  who  shall  solve  that  prob- . 

lem  will  win  the  trade  of  Mexico  when  she  has 
trade.  That  is  all  which  is  to  be  known,  and  the 
only  issue  to  be  faced. 


x  PREFACE 

This  book  is  not  a  radical  document.  It  does 
not  seek  to  explain  the  problems  of  to-day  in  terms 
of  to-morrow.  The  author  finds  in  the  radical 
movements  of  the  present  the  leaven  of  the  fu- 
ture— little  else.  He  sees  in  the  upheavals  of  our 
day  a  searching  for  some  essential  truth  which 
will  be  a  clarifying  factor  in  this  time  of  chaos 
and  distrust.  He  does  not  see  in  them  the  final 
solution  of  any  of  the  difficulties  which  hatched 
them  out  into  a  too  ready  world. 

Nor  is  this  book  reactionary.  The  author  be- 
lieves that  the  day  of  Diaz  is  long  past  in  Mexico, 
that  the  day  of  the  dreamer  of  Utopian  visions — 
Madero — is  past  in  Mexico.  He  seeks  in  the  pres- 
ent and  in  the  future  the  sane,  firm  grasp  of  actual- 
ities which  to  the  watcher  on  the  tower  is  the  only 
hope  of  true  progress.  He  sees  in  the  orgies  of 
Carranza  and  his  immediate  successors  not  the 
upsurgence  of  mighty  ideals,  but  of  personal  am- 
bitions and  crass  disregard  of  the  bases  of  all 
human  progress.  He  seeks,  in  the  whirling  chaos 
of  the  present,  a  firm  footing.  He  seeks  to  give 
the  direction  of  such  understanding  as  he  may 
have  to  those  who  think  with  him.  He  believes 
that  if  he  gives  such  a  direction  to  them,  it  will 
enable  them  to  go  forward  to  the  winning  of  some 
of  the  vast  profits  which  await  them  in  the  Mexi- 
can market. 

One  word  more  I  would  add.  There  rules  to-day 


PREFACE  xi 

in  Washington  a  government  one  of  whose  mighty 
maxims  is  the  protection  and  encouragement  of 
those  Americans  who  to-day  go  forth,  as  their 
fathers  went  forth  before  them,  to  carve  their 
way  in  the  wilderness.  The  Washington  govern- 
ment knows,  as  we  all  know,  that  the  only  wilder- 
ness left  to  us  is  the  open  field  of  the  vast  unde- 
veloped lands  to  the  South.  I  believe  that  Wash- 
ington plans  definitely  to  support  the  American 
pioneer  to  the  fullest  in  his  new  conquest  of  the 
New  World.  That  his  weapons  of  conquest  are 
dollars  and  brains  and  energy  matter  not,  and 
that  he  battles  in  lands  over  which  the  flag  shall 
never  fly  matters  less.  The  fact  that  he  is  an 
American,  that  he  is  honest,  that  he  is  patriotic 
and  sincere — these  matter  much  in  Washington. 

This  book,  then,  goes  upon  its  way,  its  record 
clear  and  envisioned  in  deep  frankness  and  in 
deep  faith  in  the  American  business  man  and  in 
the  American  government  of  to-day.  I  offer  it  to 
those  who  must  go  forth,  to  those  who  must  per- 
force place  the  funds  at  the  disposal  of  those  who 
go,  and  to  those  who,  in  the  councils  of  our  gov- 
ernment, are  quietly,  without  ostentation  or  polit- 
ical apology,  placing  firm  hands  to  the  backs  of 
those  who  dare  and  who  give. 

WALLACE  THOMPSON, 

NEW  YOEK, 

August  6,  1921. 


CONTENTS 

CHAPTER  PAGB 

I    TRADING  WITH  MEXICO  .       ...  1 

II    NATURE  AND  THE  MEXICAN  MARKET     .  16 

III  THE  PEOPLE  WHO  BUY        ...  48 

IV  THE  CREDIT  OF  MEXICO  AND  OF  THE 

MEXICANS 69 

V    OUR    BILL    AGAINST    REVOLUTIONARY 

MEXICO 96 

VI    MEXICO  AND  HER  "  BOLSHEVISM  "       .  128 

VII    THE  RAPE  OF  YUCATAN   ....  159 

VIII    THE  ROMANCE  OF  MEXICAN  OIL     .       *  196 

IX    THE  GOLDEN  GEESE       .       .       .       ,  240 

X    THE  HIGHWAY  TO  SOLUTION              .  258 


TRADING  WITH  MEXICO 


TRADING    WITH 
MEXICO 

CHAPTER  I 

TRADING  WITH  MEXICO 

THREE  fundamentals  determine  and  will  deter- 
mine American  participation  in  Mexican  trade. 
Excursions,  however  wet,  will  not  change  those 
fundamentals.  Enthusiasm,  however  sincere,  will 
not  affect  them.  Above  all,  promises  should  not 
be  taken  into  consideration  in  our  cool  judgment 
of  them.  American  business  men  have  never  been 
noted  for  sentimentalism  in  their  own  country; 
they  should  not  be  sentimental  in  other  countries. 
Let  us  take  up  the  situation  and  look  at  it  with 
the  sane  judgment  we  would  apply  to  the  question 
of  selling,  say,  a  new  type  of  water  meter  in  New 
York  City. 

The  three  fundamentals  of  the  Mexican  trade 
question  are  not  unique.  They  are,  first,  the  Mar- 
ket ;  second,  the  Credit,  and  third,  the  Government 
and  Laws  under  which  trade  must  be  carried  on. 
Truly  not  original,  and  the  astonishing  thing 


2  TRADING  WITH  MEXICO 

about  American  business  men  who  consider  Mex- 
ico is  that  they  apparently  lose  sight  of  them,  and 
most  of  all  lose  sight  of  the  emphasis  which  must 
be  given  to  each.: 

First,    the    Mexican    market.      Three    phases 
again:  the  people,  the  industries  and  the  need.; 
There  are  15,000,000  people  in  Mexico.    Of  these, 
6,000,000  are  Indians,  and  Indians  that  are  com- 
parable, literally,  to  our  own  reservation  Indians 
in  the  United  States,  in  the  things  they  buy  and 
the  things  they  make.    There  are  8,000,000  mixed- 
bloods,  a  cross  of  Indian  and  Spanish,  but  of  these 
3,000,000  fully  6,000,000  are  almost  as  Indian  as 
their  full-blood  cousins.    In  other  words,  12,000,- 
€00  out  of  15,000,000  take  and  need  nothing  from 
the  outside  world  excepting  food,  at  those  times, 
like  the  present,  when  they  do  not  produce  enough 
for  their  own  needs.    More  than  that,  the  money 
or  goods  which  would  pay  for  imported  food  for 
the  12,000,000  are  created  by  the  remaining  3,000,- 
000 — in  other  words,  the  actual  market  in  Mexico 
is  not  15,000,000  people  but  3,000,000.     The  rest 
wear  no  shoes — only  native  tanned  sandals.    They 
wear  no  civilized  clothes,  only  white  cotton  woven 
at  home.    They  wear  only  home-made  hats,  the 
raw  material  the  fiber  of  palm  trees  which  grow 
wild.    They  have  no  need  for  culture,  for  houses, 
for  travel.    Remember,  then,  a  buying  population 
of  3,000,000. 


TRADING  WITH  MEXICO  3 

The  industries  are  limited  almost  exclusively  to 
the  extraction  of  the  riches  of  the  soil  by  mining 
and  through  deep  oil  wells.  In  all  Mexico,  with 
its  vast  sweep  of  territory,  virtually  nothing  is 
produced  for  export  excepting  those  riches  which 
come  from  Mother  Earth,  and  those  overwhelm- 
ingly under  the  enterprising  management  of  the 
foreign  companies  and  individuals  who  alone  have 
ever  sought  to  develop  them.  Only  one  industry 
in  Mexico  puts  human  hands  and  human  brains  to 
the  wheel  of  progress  and  creates  wealth — that  is 
the  industry  of  growing  sisal  hemp  in  Yucatan. 
Sisal  hemp  is  indispensable  for  the  making  of 
binder  twine  for  the  world's  wheat  crop,  and  is 
the  basis  of  what  was  once  a  great  national  and 
international  industry.  Yet  to-day  even  that  com- 
modity has  been  cut  in  production  almost  to  the 
point  of  destruction,  by  the  machinations  of  Mexi- 
can government  and  graft,  and  Yucatan  is  not  to- 
day the  great  purchasing  center  that  it  once  was. 
Moreover,  Yucatan  is  far  from  the  Mexican  main- 
land, a  principality,  a  country  of  its  own,  and  its 
riches  have  never  been  a  true  part  of  the  re- 
sources of  Mexico,  for  it  buys  and  sells  direct 
with  the  outside  world. 

Gold  is  the  common  medium  of  circulation  in 
Mexico  to-day.  There  is  not  a  peso  of  Mexican 
paper  currency  in  use.  All  is  gold,  or  foreign 
bills,  with  low-grade  silver  and  copper  as  sub- 


4  TEADING  WITH  MEXICO 

sidiary  coins.  The  use  of  gold  is  reassuring  to 
the  business  man.  It  looks  like  prosperity  and  it 
does  assure  a  firm  rate  of  exchange.  But  the  gold 
in  Mexico  does  not  mean  these  things.  Its  great 
significance  is  the  absence  of  credit.  Gold  cir- 
culates because  no  man  trusts  the  government, 
and  every  piece  of  gold  that  passes  through  your 
hands  in  Mexico  tells  you  that  Mexico  is  far  from 
being  on  a  stable  financial  basis,  either  as  a  gov- 
ernment or  as  a  business  community.  Gold  is  of 
value,  really,  only  because  it  makes  credit  possi- 
ble. When  you  must  ship  boxes  of  gold  into  dis- 
tant states  at  an  appalling  rate  of  insurance 
against  bandits  and  highwaymen,  it  is  not  pros- 
perity, but  rather  the  lack  of  it.  When  gold  is  in 
circulation,  and  there  are  no  bills,  the  available 
money  of  the  country  is  limited,  literally,  to  the 
total  of  the  gold  and  to  not  one  cent  more.  When 
there  is  paper  in  circulation  it  means  that  the  gold 
supply  has  been  increased  many  fold  because  the 
credit  of  the  government  has  been  added  to  the 
gold  to  supplement  the  supply  of  money  to  be  used 
in  trade. 

In  Mexico  there  is  not  only  no  paper  money,  but 
there  is  practically  no  commercial  paper.  The 
drafts  of  great  foreign  companies  travel  about  the 
land  for  weeks  and  months  before  they  are  cashed 
and  when  they  finally  reach  the  bank  on  which 
they  are  drawn,  the  backs  are  covered  with  en- 


TRADING  WITH  MEXICO  5 

dorsements,  and  on  some  an  extra  sheet  of  paper 
has  been  pasted  to  carry  more  signatures.  And 
that  is  not  good  business,  and  should  not  be  re- 
assuring to  the  prospective  trader. 

In  Mexico  to-day  no  one  trusts  the  government, 
and  as  a  result  no  one  trusts  his  neighbor.  The 
business  men  of  Mexico  who  are  demanding  long- 
term  credits  abroad  will  not  trust  their  oldest  cus- 
tomers, and  cannot  themselves  get  credit  in  their 
own  country.  Recently,  when  the  Mexican  gov- 
ernment wanted  credit  on  a  large  supply  of  rail- 
way equipment,  it  was  told  that  if  one  young  Amer- 
ican, engaged  in  running  private  trains  at  heavy 
cost  over  the  Mexican  railway  systems,  would 
guarantee  the  bills,  the  Mexican  government  could 
have  what  it  needed.  Otherwise,  cash  with  order. 
The  Mexican  government  is  trying  to  get  railway 
equipment,  and  is  making  promising  announce- 
ments. But  it  is  getting  very  little,  and  for  what 
it  is  getting  it  pays  almost  entirely  in  cash,  or, 
strangely  enough  in  this  age,  barters  commodities 
or  prepaid  freight  tickets  for  it !  These  are  facts, 
and  extremely  significant  facts.  The  railway 
equipment  men  want  to  know  how  the  government 
is  going  to  pay — and  that  is  what  all  Americans 
who  contemplate  trade  with  Mexico  should  want 
to  know. 

But  the  need  of  Mexico,  the  power  we  have  to 
help  her  rehabilitate  herself !  Ah,  that  is  a  strong 


6  TRADING  WITH  MEXICO 

bid,  even  with  what  we  have  called  the  unsenti- 
mental American  business  man.  He  wants  to 
give  her  a  lift  now,  when  she  needs  it,  and  then 
he  will  not  be  forgotten  when  the  big  splitting  up 
of  profits  comes.  Perhaps  this  is  true.  Let  us 
look  at  it.  For  some  years  now  we  have  been 
following  the  very  laudable  and  beautiful  system 
of  going  more  than  half  way  with  Mexico.  We  are 
still  urged  to  follow  this  excellent  method.  The 
only  trouble  is  that  the  "more  than  half  way"  is 
getting  longer  and  longer,  and  Mexico  is  asking 
more  and  more  and  giving  less  and  less.  The 
kindly  souls  who  have  sought  to  get  into  Mexico 
with  their  surplus  stocks  are  not  gaming  anything, 
except  curses  and  distrust.  So  far,  save  for  the 
promises  which  have  always  been  forthcoming, 
there  is  nothing  coming  out  of  Mexico  to  help  the 
trade  we  are  hearing  about. 

Most  of  the  talk  about  Mexican  trade  for  Amer- 
ican manufacturers  was  born,  moreover,  of  our 
own  need  to  get  rid  of  accumulated  goods.  Be- 
ginning late  in  1919,  there  was  considerable  inflow 
of  these  cheap  goods  into  Mexico  on  good  terms. 
Those  who  were  fortunate  enough  to  unload 
talked  of  it,  and  the  gossip  went  about  that  Mexico 
was  a  fine  place  to  sell  off  extra  stocks.  But  after  a 
year,  the  unloading  system  began  to  glut  the  Mex- 
ican market,  and  to-day,  when  the  same  manufac- 
turers want  to  sell  again,  they  find  that  Mexico 


TKADING  WITH  MEXICO  7 

will  take — only  goods  at  sacrifice  prices.  They 
went  half  way  and  more,  did  our  manufacturers, 
and  Mexico  did  not  "come  back."  Instead  she 
sat  tight  where  we  came  to  her,  and  insisted  on 
our  coming  a  little  further  with  concessions  to 
her  needs  and  wants.  The  result  is  that  to-day 
there  is  nothing  like  the  demand  for  American 
goods  that  there  was  when  we  first  did  the  un- 
loading which  we  thought  would  whet  the  Mexi- 
can appetite.  Mexico  is  like  the  customer  of  a 
"fire  sale"  store — she  will  buy  only  the  most  ob- 
vious bargains.  It  is  cash  trade  for  a  section  of  a 
town  where  there  used  to  be  credit,  and  where 
there  is  no  credit  to-day.  But  the  customer  is 
again  demanding  credit — and  cash-trade  bargains 
at  the  same  time. 

This  question  of  credit  is  of  necessity  compli- 
cated. But  perhaps  the  answer  as  far  as  the 
American  business  man  is  concerned  is  contained 
in  the  fact  that  while  the  Mexican  merchant  de- 
mands credit  he  himself  does  not  give  credit — no 
country  was  ever  on  so  thorough  a  cash  basis  as 
Mexico  is  to-day.  The  merchant  who  is  asking 
for  credit  is  carrying  on  his  business  from  hand 
to  mouth;  he  has  no  accounts  on  his  books  to 
guarantee  the  goods  for  which  he  is  promising 
to  pay.  He  asks  credit  on  his  character  standing 
and  on  the  possibilities  of  his  market — he  offers 
literally  nothing  else.  Personally,  many  Mexicans 


8  TRADING  WITH  MEXICO 

and  many  foreigners  in  Mexico  are  reliable  and 
honest  men,  but  no  sane  business  man  would  take 
in  the  United  States  risks  similar  to  those  de- 
manded by  his  prospective  customers  in  Mexico. 
And  the  possibilities  of  the  market — those  are  as 
yet  thin  air  and  enthusiastic  hope,  which  gain 
strength  only  from  our  national  need  to  get  a 
foreign  outlet  to  keep  our  plants  going.  Let  the 
American  manufacturer  weigh  these  two  consider- 
ations with  the  additional  realization  that  there 
is  no  reserve  credit  in  the  background. 

Reserve  credit,  such  as  bills  payable,  sound 
real  estate  values  and  prospects  of  peace  and 
good  business  years  ahead,  are  comparable  to  the 
unseen  sources  of  energy  in  the  human  body,  on 
which  that  body  lives  and  thrives  during  lean 
periods.  Mexico's  lean  period  has  now  lasted  for 
eleven  long  years,  and  in  that  period  the  country 
has  been  living  literally  on  its  reserves  alone. 
Again  and  again  one  hears  the  expression,  ' t  Mex- 
ico is  living  on  her  fat,"  and  the  continued  marvel 
is  that  she  has  lived  so  long  and  survived  such 
lengthened  calamities  through  so  many  ghastly 
years  of  destruction.  As  this  is  written,  there  has 
been  some  appearance  of  regeneration,  a  noisily 
announced  period  of  " reconstruction."  But  as 
yet  this  is  only  an  appearance.  Actually  while  the 
wheels  of  business  and  life  are  running  more 
smoothly  for  the  moment,  this  is  obviously  a  sur- 


TRADING  WITH  MEXICO  9 

face  condition — deep  down  under  the  surface  of 
Mexican  life  the  wasted  tissue  remains.  Mexico 
is  not  yet  filling  the  interstices  of  her  flesh  with 
that  reserve  strength  which  is  business  credit  and 
business  promise. 

But  why  not  help  in  the  rebuilding,  and  thus 
take  a  risk  which  will  probably  bring  great  gain  in 
the  years  of  progress  to  come  ? 

The  answer  to  this  question  must  be  based  on  a 
thorough  understanding  of  the  third  of  our  three 
great  issues — Mexican  Government  and  Law  as 
applied  to  business.  The  Mexican  revolutions 
which  began  in  1910  had  for  their  announced  ob- 
ject, "Mexico  for  the  Mexicans."  The  idea  was 
to  bring  the  foreigner  under  control  of  Mexican 
law  and  government.  This  was  eminently  just — if 
it  were  true,  as  assumed,  that  under  the  Diaz  re- 
gime the  foreigners  had  been  above  the  Mexican 
law.  The  facts  were  largely  otherwise,  however, 
despite  some  glaring  abuses.  In  the  working  out 
of  the  idea  of  "Mexico  for  the  Mexicans,"  the  re- 
vised as  well  as  the  entirely  new  legislation  and 
procedure  went  far  beyond  the  normal  reaction 
against  the  alleged  irregularities  of  the  Diaz  time. 

In  the  new  "Constitution  of  1917,"  which  is  lit- 
erally the  most  radical  written  constitution  of 
any  country  in  the  world  to-day,  the  chief,  if  not 
the  only  object  was  to  make  difficult  the  operation 
of  foreigners  in  any  line  of  business  in  the  coun- 


10  TRADING  WITH  MEXICO 

try.  The  laws  against  their  holding  land  are  dras- 
tic and  final  in  their  import ;  no  foreigner  may  own 
property  within  sixty  miles  of  the  border  or  within 
thirty  miles  of  the  sea ;  foreigners  may  not  control 
a  Mexican  corporation  formed  for  the  purpose  of 
holding  such  land  unless  they  waive  their  citizen- 
ship rights  with  respect  to  such  companies ;  great 
estates  are  prohibited,  so  that  true  agricultural 
industry  is  made  virtually  impossible;  foreign 
plans  for  irrigation  projects — the  one  hope  of  the 
Mexican  farmer — are  nipped  and  killed;  most  se- 
rious of  all,  such  lands  are  virtually  confiscated 
through  nationalization  projects  which  have  al- 
ready been  applied  to  many  great  properties,  some 
of  them  of  foreigners,  and  have  been  kept  from 
affecting  others  only  by  active  diplomatic  protest. 

But,  the  casual  observer  of  things  Mexican  asks, 
how  is  it  that  business  still  continues?  How  is  it 
that  the  oil  companies  to  whom,  we  are  told,  these 
nationalization  laws  especially  apply,  how  is  it 
that  the  oil  companies  are  still  doing  business,  are 
still  drilling  wells  and  taking  out  oil?  Does  this 
not  mean  that  these  laws  are  merely  provisions 
against  a  revival  of  the  abuses  of  the  old  days? 
These  are  the  questions  that  occur,  as  the  Mexi- 
cans planned  them  to  occur,  to  the  outside 
observer. 

The  Mexicans  assure  us  that  this  is  truly  the 
case,  but  the  effect  of  the  laws  is  very  different. 


TRADING  WITH  MEXICO  11 

Their  effect  is  to  place  all  business,  Mexican  and 
American,  foreign  oil  wells  and  native  merchants 
alike,  in  the  status  of  receiving  the  privilege  of 
doing  business,  in  place  of  the  right  of  doing  busi- 
ness. In  effect  they  make  every  foreigner  in  Mex- 
ico, from  the  missionaries  who  conduct  services 
contrary  to  the  law  of  the  land  which  prohibits 
foreigners  from  officiating  as  priests  before  their 
own  altars  to  the  oil  men  who  dig  wells  under  per- 
mits wheedled  out  of  a  grasping  government  de- 
partment, law-breakers  or  receivers  of  special  and 
" pernicious"  privilege.  To-day  no  business  man 
can  defend  his  rights  before  the  courts  of  Mexico, 
for  all  rights,  even  the  common  rights  of  corpo- 
rate business,  are  in  some  way  or  another  contra- 
dictory to  the  laws  of  the  land.  They  receive  priv- 
ilege, and  privilege  in  great  and  generous  measure 
— if  they  are  friendly  to  the  ruling  group  or  their 
satellites.  They  receive  privilege  by  the  grace  of 
government,  not  rights  by  the  power  of  govern- 
ment. Government  theoretically  exists  for  the 
protection  of  the  weak,  but  government  in  Mexico 
exists  actually  for  the  exploitation  of  the  strong 
by  officials  and  for  the  suppression  of  the  weak  if 
the  strong  want  and  can  pay  for  such  suppression. 
Strangely  enough,  the  strong  in  Mexico  are  not 
altogether  contented  with  this  condition.  Some- 
how business,  with  its  awakening  consciousness  to 
its  helplessness,  is  finding  the  situation  irksome. 


12  TRADING  WITH  MEXICO 

The  greatest  single  industry  in  Mexico  to-day  is 
oil,  and  oil  pays  about  $50,000,000  a  year  in  vari- 
ous taxes  to  the  Mexican  government— and  for 
what?  Almost  all  of  it  for  the  privilege  of 
doing  business,  and  the  result  is  that  oil  is  at  the 
mercy,  to-day,  of  government  caprice  and  the  ca- 
price of  Mexican  officials.  The  laws  of  the  present 
era  of  Mexico  are  enacted  literally  for  the  pur- 
pose of  having  a  "club"  of  control  over  all  forms 
of  business  activity,  laws  to  be  enforced  when  it  is 
convenient,  or  to  be  "forgotten"  when  that  is  de- 
sirable. The  oil  companies  spend  time  and  vast 
effort  to  keep  their  protests  to  the  Washington 
and  Mexican  governments  in  good  order— so  that 
the  price  of  their  privileges  may  be  kept  low.  The 
legitimate  portion  of  their  taxes  is  only  about 
forty  per  cent  of  the  total  sum  they  pay,  but  it  is 
probably  literally  true  that  they  would  pay  all 
they  now  pay  and  more  if  they  could  dispense  with 
the  rule  of  privilege  and  trade  it  for  decent  human 
rights  to  do  decent  business  in  a  decently  gov- 
erned country. 

In  this,  these  companies  are  fighting  the  fight 
of  the  individual  business  man  as  well  as  the  fight 
of  their  own  stockholders.  It  may  all  be  selfish, 
and  doubtless  is,  but  by  a  strange  turn  of  affairs, 
the  laws  of  Mexico  have  worked  out  to  the  crea- 
tion of  salable  privilege  instead  of  defensible 
rights,  and  this  has  thrown  all  business  into  the 


TRADING  WITH  MEXICO  13 

same  group.  The  business  problem  of  Mexico  is 
literally  the  achievement  of  this  exchange  of  priv- 
ileges for  rights.  And  until  that  exchange  is  ef- 
fected, he  is  but  a  gambler  who  goes  into  Mexico 
to  seek  or  to  offer  honest  business,  for  even  though 
he  should  gain  much  sure  profit  in  the  beginning, 
those  profits  will  be  more  than  wiped  out  later 
unless  the  legitimate  business  of  Mexico  is  given 
the  legitimate  rights  of  business. 

And  how  is  this  exchange  of  privileges  for  rights 
to  be  effected?  This  is  the  problem  that  confronts 
American  business  and  American  government  to- 
day. The  issue  is  joined  clean  and  is  simple  in- 
deed. The  provisions  of  the  Mexican  Constitution 
of  1917  and  the  laws  which  give  it  effect  remain 
on  the  Mexican  statute  books  to-day  because  they 
are  profitable  to  the  group  in  control  of  the  gov- 
ernment. They  mean,  literally,  graft  and  power, 
for  where  privilege  is  necessary  for  the  carrying 
out  of  business,  there  is  a  price  on  privilege,  but 
where  rights  are  provided  for  business,  the  price 
and  the  prize  are  upon  industry  and  activity. 

To  the  members  of  the  American  Chambers  of 
Commerce  on  tour  in  Mexico,  to  the  American 
manufacturers  who  are  invited  to  ship  goods  to 
Mexico  to-day,  offers  of  privilege  are  made,  priv- 
ilege without  graft  or  price,  now.  But  the  price 
is  there,  and  is  clearly  worked  out  in  the  subtle 
Mexican  mind.  These  American  business  men, 


14  TRADING  WITH  MEXICO 

pleased  with  their  reception,  are  to  become  boost- 
ers of  the  Mexican  government,  demanding  its 
recognition  and  scouting  the  great  financial  inter- 
ests who  are  their  traditional  enemies  at  home. 
That  is  price  enough  to  the  Mexican  mind.  But 
when  recognition  is  gained,  and  when  those  same 
individuals  seek  to  do  business  in  Mexico  under 
"normal"  conditions,  the  laws  which  ensconce 
privilege  and  give  it  into  the  hands  of  petty  and 
high  officials  for  dispensation,  will  reap  their  toll. 

One  way  only  remains — the  removal  of  privi- 
lege, the  establishment  of  rights.  Insistence  on 
these  issues  alone  will  almost  solve  the  Mexican 
problems  politically  and  commercially.  But  the 
Mexicans  are  wise  indeed  when  they  seek  to  di- 
vide the  counsels  of  this  country,  to  place  the  small 
American  business  man  and  manufacturer  in  a 
position  of  antagonism  to  the  issues  that  are  set 
clear  in  Washington,  the  issues  of  political  privi- 
lege versus  political  rights,  the  issues  of  the  busi- 
ness privileges  which  those  individual  Americans 
seek  to  gain  for  themselves  versus  the  business 
rights  that  will  include  them  and  all  their  fellows. 

The  call  is  again  for  clear  foresight  and  not  for 
sentimentalism,  for  a  social  conception  of  busi- 
ness and  not  for  a  selfish,  individualistic  hope  of 
getting  in  ahead  of  the  next  fellow.  The  Ameri- 
cans who  have  been  longest  in  Mexico  are  begging 
to-day  for  rights  in  exchange  for  privilege.  They 


TEADING  WITH  MEXICO  15 

know,  as  those  who  look  upon  Mexico  from  outside 
or  as  newcomers  do  not  know,  that  until  Mexico 
mends  her  ways  with  business,  business  can  never 
rescue  Mexico  from  the  slough  of  her  present  un- 
happiness.  They  know  that  no  business  in  any 
nation  can  long  prosper  without  the  prosperity  and 
the  good  sense  of  the  government  of  that  nation. 
They  are  not  pirates,  and  they  know  that  piracy, 
in  government  or  in  business,  leads  but  to  the  de- 
struction of  both.  What  they  know  we  may  have 
for  the  listening.  If  we  do  not  take  it,  we,  too, 
must  learn,  as  they  learned,  in  the  costly  school 
of  experience.^ 


CHAPTER  II 

NATUBE    AND   THE    MEXICAN    MARKET1 

EVEEY  land  upon  this  globe  owes  to  nature  that 
predetermination  of  its  products  and  its  needs 
which  are  the  vital  factors  of  its  commerce  and  its 
industries.  Even  the  nature  of  its  races,  which 
has  so  much  to  do  with  the  standards  of  living 
which  affect  the  quality  and  volume  of  business, 
is  determined  to  a  certain  extent  by  climate  and 
geography.  It  is  therefore  a  fundamental  need 
of  all  \vho  have  a  deep  interest  in  Mexican  busi- 
ness to  grasp  something  of  the  location,  the  for- 
mation, and  the  climate  of  that  country.  For  few 
nations  in  the  world  have  a  more  wonderful  loca- 
tion, and  few  have  a  more  disastrous  climate. 

The  vast  cornucopia-like  triangle  of  land  which 
comprises  the  territory  of  Mexico  lies  south  of 
nearly  three-quarters  of  the  southern  boundary 
of  the  United  States.  Its  western  tip  touches 
Southern  California  at  the  Pacific  and  its  most 
easterly  point  is  500  miles  south  of  the  Pensacola, 
at  the  western  end  of  Florida.  For  1,833  miles 

iThis  chapter  is  based  upon  the  author's  article  on  Mexican 
Geography  contributed  to  the  important  Mexican  Year  Book  for 
1920-21,  published  in  Los  Angeles,  Calif.,  concurrently  with  this 
volume. 

16 


NATURE  AND  THE  MARKET    17 

Mexico's  northern  border  is  contiguous  to  the 
United  States,  693  miles  eastward  along  arbi- 
trarily marked  lines  from  the  Pacific  Ocean  to  El 
Paso,  Texas,  and  the  remainder  southeastward 
along  the  sinuous  course  of  the  Rio  Grande  to  the 
Gulf  of  Mexico.  Its  jagged  southern  border  is 
hardly  400  miles  long,  touching  Guatemala  and 
British  Honduras  (Belize). 

This  cornucopia,  grasping  the  Gulf  of  Mexico  on 
the  east  like  a  great  hand,  swings  southeastward 
from  the  Pacific  contact  with  the  United  States 
until  the  most  westerly  point  of  the  Guatemalan 
border  is  500  miles  east  of  Mexico's  easternmost 
contact  with  the  United  States  on  the  north. 

Set  apart,  as  Mexico  is  by  her  boundaries,  she 
seems  in  form  much  like  a  great  peninsula,  but  she 
has,  herself,  two  important  peninsulas  as  part  of 
her  territorial  extent  and  configuration.  One  is 
the  Peninsula  of  Yucatan,  which  forms  the  eastern 
end  of  the  cornucopia,  the  thumb  of  the  curving 
hand  which  grasps  the  Gulf  of  Mexico,  an  area  of 
about  50,000  square  miles.  The  other  is  the  long, 
narrow  peninsula  of  Lower  California,  with  58,343 
square  miles,  extending  directly  south  of  the 
American  state  of  California  and  connected  with 
the  Mexican  mainland  by  only  a  narrow  strip. 

That  mainland  comprises,  with  the  two  penin- 
sulas, 765,762  square  miles,  and  the  1,561  square 
miles  of  coastal  islands  under  Mexican  sov- 


18  TRADING  WITH  MEXICO 

ereignty  bring  the  total  area  of  the  country  up  to 
767,323  square  miles.  The  greatest  width  of  the 
mainland  is  750  miles,  and  the  greatest  length  is 
1,942  miles,  from  the  northwestern  tip  of  Lower 
California,  where  it  joins  the  United  States,  to  the 
southermost  point  in  the  jagged  Guatemalan  bor- 
der in  the  Mexican  state  of  Chiapas.  The  narrow- 
est point  in  Mexico  is  120  miles,  at  the  Isthmus  of 
Tehuantepec,  once  discussed  as  the  possible  site  of 
an  interoceanic  canal,  and  in  the  time  of  Diaz  the 
route  of  a  great  transshipping  railway  between 
the  Pacific  and  the  Gulf  of  Mexico.  The  Atlantic 
(Gulf  of  Mexico)  coastline  of  Mexico  is  1,727 
miles  long,  that  of  the  Pacific  (including  the  long 
border  of  Lower  California)  4,574  miles. 

Lying  between  32°  30'  and  14°  30'  North  Lati- 
tude and  86°  30'  to  117°  Longitude  west  from 
Greenwich,  the  triangular  form  of  the  Mexican 
territory  places  it  about  equally  in  the  temperate 
and  torrid  zones.  This  is  a  primary  factor  in 
Mexican  climate,  but  far  more  significant  is  the 
contour  of  the  country  itself. 

This  is  largely  mountainous,  for  if  we  include 
the  high  but  fertile  table-lands,  nearly  two-thirds 
of  the  country  is  covered  with  mountain  ranges. 
The  Eocky  Mountains  of  the  United  States,  the 
great  backbone  of  the  Western  Hemisphere,  cross 
the  Mexican  border  into  Sonora,  in  a  low,  nar- 
row range.  Almost  immediately  south  of  the  in- 


NATURE  AND  THE  MARKET    19 

ternational  line  they  begin  spreading  eastward. 
A  long,  slowly  rising  valley  a  hundred  miles  wide 
continues  southward  from  El  Paso,  narrowing 
rapidly,  while  to  the  eastward  of  this  valley  rises 
an  apparently  new  range  of  mountains,  obviously 
a  part  of  the  great  Rocky  Mountain  range,  but 
unconnected  with  iti  in  the  United  States  and 
south,  indeed,  of  the  broad  flat  plains  of  Texas. 
This  is  the  Sierra  Madre  Oriental,  or  Eastern 
Mother  Range,  the  continuation  of  the  Rockies  in 
Sonora  and  Durango  being  called  the  Sierra 
Madre  Occidental,  or  Western  Mother  Range. 
Further  south,  these  two  join  together,  and  spread 
to  virtually  the  whole  width  of  Mexico,  excepting 
for  the  Gulf  coastal  plain,  some  300  miles  wide, 
to  the  east.  All  of  Central  Mexico  is  mountain- 
ous, flattened  only  by  vast  plateaus  which,  ac- 
cording to  the  accepted  geological  theory,  were 
created  by  alluvial  deposits  and  lava  dust  from 
the  mountains  which  rise  still  above  them.  At  the 
Isthmus  of  Tehuantepec,  the  Sierra  Madre  flat- 
tens out  till,  save  for  the  relatively  easy  grades 
which  climb  from  the  Gulf  and  from  the  Pacific  to 
the  summit  of  the  low  divide  (less  than  300  feet 
above  sea  level)  the  mountains  might  be  all  but 
gone.  The  narrow  plane  of  the  Isthmus  passed, 
the  mountains  rise  again  until  the  center  of  the 
state  of  Chiapas  is  once  more  a  vast  plateau  ac- 
cented with  towering  peaks,  a  formation  which 


20  TRADING  WITH  MEXICO 

continues  southward  through  Central  America, 
lowers  again  at  Panama,  but  joins  directly,  at  last, 
with  the  South  American  Andes. 

In  this  sweep  of  mountainous  territory  are  hun- 
dreds of  deep  canons  or  barrancas,  great  fertile 
plateaus,  and  many  wonderful  mountains.  Of 
these  last  those  about  the  Valley  of  Anahuac,  the 
site  of  Mexico  City  and  for  ages  the  center  of  Mex- 
ican government  and  population,  are  the  most 
famous.  Here  are  Popocatepetl  (17,520  feet)  and 
Ixtaccihuatl  (16,960  feet)  the  snow-peaked  vol- 
canoes, and  to  the  eastward  the  still  more  beauti- 
ful cone  of  Orizaba  (18,250  feet).  Virtually  at 
the  same  latitude,  but  far  to  the  west,  is  Colima, 
(12,991  feet),  a  still  active  volcano.  Toluca 
(14,950  feet),  close  to  the  Valley  of  Mexico,  Ma- 
linche  (14,636  feet)  in  the  state  Tlaxcala,  the 
Cofre  de  Perote  (13,400  feet)  in  the  state  of  Vera 
Cruz,  and  Tancitaro  (12,664  feet)  are  those  of 
greatest  height.  Only  the  already  great  altitude 
of  the  plateaus  of  Mexico  from  which  most  of  the 
striking  mountains  spring  keeps  hundreds  of 
others  from  filling  the  eye  of  the  traveler.  The 
scenery  which  results  from  the  mountainous  for- 
mations of  Mexico  is  literally  unsurpassed,  for 
Popocatepetl  and  Ixtaccihuatl  can  give  the  climber 
all  the  thrills  of  the  Alps,  and  the  crater  lakes  to 
be  found  in  one  or  two  sections  of  Mexico  rival  in 
splendor  the  more  famous  resorts  in  Europe. 


NATURE  AND  THE  MARKET    21 

The  deep  and  wide  barrancas  which  mark  the 
mountainous  formation  all  through  Mexico  are 
magnificent  to  contemplate,  but  the  day's  journey 
down  and  up  the  sides  of  such  a  geological  spec- 
tacle as  the  Barranca  of  Beltran  brings  home  to 
even  the  unscientific  observer  the  terrific  handi- 
caps which  these  vast  cuts  put  upon  the  industrial 
development  of  the  country.  Much  of  the  con- 
quering of  these  handicaps  was  achieved  under  the 
broad  railway  policy  of  President  Diaz,  and  the 
work  done  still  remains,  but  many  years  must  now 
pass  before  the  final  conquest  is  achieved.  Such 
a  work  as  the  building  of  the  Colima  branch  of  the 
Mexican  Central,  completing  the  only  direct  line 
for  the  first  time  from  the  Capital  to  the  Pacific, 
will  hardly  be  repeated  when  revolution  threatens, 
for  here,  in  less  than  100  miles,  twenty  great 
bridges  had  to  be  built,  most  of  them  crossing 
barrancas  and  cuts  of  mere  geological  formation, 
with  virtually  no  streams  filling  them  even  in  the 
rainy  season.  The  Southern  Pacific  line  from  the 
northern  border  in  Sonora  lacks  but  sixty  miles  of 
linking  up  with  the  Guadalajara  branch  of  the  Na- 
tional Railways,  but  thirty  of  those  sixty  miles  are 
through  a  mountainous  territory  cut  with  deep 
barrancas  which  will  cost  close  to  a  million  dol- 
lars a  mile  to  build. 

Such  barrancas  and  valleys  do  not,  of  them- 
selves, indicate  either  great  natural  water  power 


22  TRADING  WITH  MEXICO 

or  navigable  streams.  There  are  wonderful  water 
power  possibilities  in  Mexico,  to  be  sure,  which 
come  from  two  factors,  the  sheer  drops  which  give 
ideal  power  sites  with  tremendous  heads  of  water, 
and  the  heavy  torrential  rainy  season.  But  the 
streams  themselves  do  not  carry  sufficient  water 
the  year  round  to  justify  any  plant,  and  tremen- 
dous reservoir  development  is  vital  to  any  power 
plant  design.  Such  reservoirs  have  been  built  in 
various  parts  of  Mexico,  but  at  appalling  expense, 
such  as  only  great  financial  interests  can  swing — 
only  foreign  capital  or  the  government  has  been 
able  to  handle  them.  There  is  an  added  and  un- 
expected element  of  difficulty — the  porousness  of 
much  of  the  soil  of  Mexico.  The  mountains,  in- 
deed, are  of  igneous  rocks,  but  underneath  the 
valleys  is  often  soft  limestone,  and  more  often 
still,  under  those  places  where  a  great  impound- 
ing of  water  might  be  made  with  a  relatively  low 
and  inexpensive  dam,  is  the  soft,  porous  alluvial 
and  volcanic-ash  land  with  which  the  valleys  have 
been  filled  up. 

This  porous  soil  and  limestone  are  factors  bear- 
ing on  the  absence  of  navigable  streams.  Even  in 
the  lowlands  the  streams  run  underground  in 
Mexico,  and  while  they  can  be  tapped  by  shallow 
wells,  they  deprive  Mexico  almost  entirely  of  the 
advantages  of  river  transportation.  Even  the 


NATURE  AND  THE  MARKET    23 

Rio  Grande,  on  the  northern  border,  is  useless  for 
navigation  most  of  the  year.  The  Panuco,  at 
whose  mouth  is  located  the  great  oil  center  of  Tam- 
pico,  is  navigable  only  a  short  distance  above  that 
port.  The  broad,  rich  coastal  plain  along  the  Gulf 
of  Mexico  is  watered  by  tiny  streams,  all  of  which, 
excepting  the  partially  navigable  Papaloapam, 
are  useless  for  steamers  and  even  for  launches 
most  of  the  year.  Not  until  we  reach  the  Isthmus 
of  Tehuantepec  do  we  find  a  river  worth  consider- 
ing for  transportation.  The  Coatzacoalcos,  at 
whose  mouth  on  the  Gulf  of  Mexico  is  Puerto  Mex- 
ico (the  eastern  terminus  of  the  Tehuantepec  Na- 
tional Railway),  furnishes  a  highway  which  made 
possible  the  relatively  great  development  of  Amer- 
ican tropical  plantations  during  the  years  of 
peace  under  Diaz.  Its  mouth  was  then  the  port 
of  loading  for  great  ships,  but  only  by  continual 
dredging  was  it  kept  open,  and  to-day  the  port  is 
abandoned  except  for  light-draft  coasting  ships. 
Further  south,  emptying  into  the  Gulf  at  Fron- 
tera,  is  the  magnificent  system  of  which  the  Gri- 
jalva  and  the  Usumacinta  are  the  chief  streams. 
Here  indeed  have  plied  and  in  the  future  will  ply 
great  river  steamers,  for  upon  the  banks  of  the 
Usumacinta,  at  least,  are  rich  oil  fields  and  the 
fairest  farming  land  in  all  tropical  Mexico.  Both 
the  Grijalva  and  the  Usumacinta  are  magnificent 


24  TRADING  WITH  MEXICO 

streams,  and  the  latter  is  comparable,  in  its  ma- 
jestic volume,  to  the  Mississippi  itself.  Only  the 
bar  at  Frontera  keeps  them  from  being  navigable 
to  ocean  steamers.  For  a  brief  period  under 
President  Madero  this  bar  was  dredged  so  that 
fruit  boats  could  enter  and  go  to  the  docks  of  ba- 
nana farms,  encouraging  a  promising  industry 
which  was  killed  by  heavy  taxation  and  govern- 
ment neglect  of  the  dredging,  under  the  revolu- 
tionary presidents  of  recent  years.  But  this  one 
system  of  rivers  offers  virtually  all  there  is  of 
navigation  in  Mexico. 

Yucatan,  the  peninsula  which  separates  the  Ca- 
ribbean sea  from  the  Gulf  of  Mexico,  is  virtually 
without  rivers,  the  water  from  the  abundant  rain- 
fall of  its  interior  finding  its  way  to  underground 
streams  in  the  porous  underlying  coral  limestone. 

On  the  west  coast  there  are  a  few  rivers.  The 
most  important  is  the  Lerma,  which  waters  a 
large  territory  on  the  Pacific  side  of  the  conti- 
nental divide,  and  allows  some  local  transporta- 
tion. The  Balsas,  in  the  states  of  Oaxaea  and 
Guerrero,  reaches  far  inland,  but  rapids  and  shal- 
lows make  its  use  for  navigation  expensive  and 
all  but  impossible.  In  Sonora  is  the  Yaqui  river, 
navigable  for  small  boats  and  of  some  value  for 
transportation.  The  Fuerte  is  also  in  this  class. 

Another  phase  of  the  geography  of  Mexico 
which  affects  transportation  is  the  complete  ab- 


NATURE  AND  THE  MARKET    25 

sence  of  good  natural  harbors  well  located.  The 
chief  port  of  Mexico,  Vera  Cruz,  has  a  harbor 
which  was  built  artificially  around  a  partially  pro- 
tected bay.  Tampico  is  a  port  solely  because  of 
the  jetties  which  narrow  the  mouth  of  the  Panuco 
and,  with  the  help  of  dredges,  keep  the  channel 
clear.  Puerto  Mexico  has  a  similar  problem,  but 
the  smaller  river  makes  dredging  absolutely  vital. 
Frontera  is  solely  a  dredging  proposition,  as  the 
Usumacinta  and  the  Grijalva,  emptying  together 
into  the  Gulf,  have  formed  a  vast  delta  in  the  low- 
lands which  can  probably  never  be  narrowed  to 
take  advantage  of  the  great  volume  of  water  which 
they  pour  out.  Yucatan  has  literally  no  sem- 
blance of  a  harbor,  and  its  great  crops  of  sisal 
hemp  are  loaded  from  lighters  at  appalling 
expense. 

On  the  Pacific  coast,  Acapulco  has  one  of  the 
ideal  harbors  of  the  world,  completely  landlocked, 
and  open  for  medium-draft  ships.  But  it  is  rela- 
tively small,  and  moreover  as  yet  almost  inacces- 
sible to  any  railway  survey,  although  it  was  used 
by  the  galleons  from  Manila  as  a  port  for  trans- 
shipment of  the  treasures  of  the  Orient  across 
Mexico  to  the  galleons  from  Cadiz  which  came  to 
Vera  Cruz.  Salina  Cruz,  the  Pacific  terminus  of 
the  Tehuantepec  National  Railway,  was  built  from 
an  open  roadstead  with  two  lines  of  jetties  and 
seawalls,  a  work  which  inattention  has  now  all 


26  TRADING  WITH  MEXICO 

but  ruined.  Manzanillo,  the  terminus  of  the  only 
direct  railway  line  from  Mexico  City  to  the  Pacific, 
was  also  built  with  seawalls  and  opened  by 
dredges.  Mazatlan,  further  up  the  coast,  and  the 
chief  port  of  the  Southern  Pacific  Railway  of  Mex- 
ico, is  an  open  roadstead.  Guaymas,  the  port  of 
the  state  of  Sonora,  is  accessible  only  to  light-draft 
ships. 

These  are  all  great  natural  handicaps,  and  have 
affected  the  life  of  Mexico  probably  more  than  it 
will  be  possible  to  estimate.  The  mighty  and 
costly  work  of  the  Diaz  regime  in  building  harbors 
is  a  monument  to  that  " materialistic"  era  which 
will  last  through  many  years  and  has  already 
playeu  a  tremendous  part  in  furnishing  the  sinews 
of  revolution  to  succeeding  governments,  for  with- 
out that  work  Mexico  would  be  far  from  capable  of 
sustaining  herself  in  the  period  of  her  agony 
to-day. 

But  beyond  all  these  factors  of  mountains  and 
rivers  and  sea  looms  a  yet  greater  problem,  and 
still  more  far-reaching — the  problem  of  climate. 
As  noted,  Mexico  lies  in  about  equal  parts  in  the 
temperate  and  torrid  zones.  But  the  geological 
zones  are  far  more  important,  for  climate  is  af- 
fected not  alone  by  latitude  but  by  altitude  as  well. 
These  geological  zones  are  three,  the  hot  country 
or  tierra  caliente,  the  temperate  country  or  tierra 
templada  and  the  (relatively)  cold  country  or 


NATURE  AND  THE  MARKET    27 

tierra  fria.  The  hot  country  is  the  lowland  section 
along  the  coasts  from  sea  level  to  3,000  feet  alti- 
tude, where  the  mean  annual  temperature  varies 
from  76°  to  88°  Fahrenheit.  The  Mexican  termin- 
ology includes  not  only  the  lowlands  of  the  torrid 
zone,  but  the  whole  coastal  plain  up  to  the  northern 
border.  The  tierra  templada  lies  along  the  moun- 
tain slopes  and  in  the  lower  plateaus,  between 
3,000  and  6,500  feet  altitude,  where  the  tempera- 
ture is  between  65°  and  76°.  This  zone  takes  in 
the  higher  northern  sections  which  are  within  the 
temperate  zone  proper.  The  tierra  fria  takes  in 
the  high  plateaus  and  the  mountains,  between 
6,500  and  12,500  feet,  the  yearly  average  temper- 
atures varying  from  30°  to  60°,  although  the  im- 
portant sections  record  50°  or  more.  The  three 
geological  zones  each  include  about  equal  portions 
of  the  country,  but  half  of  the  inhabitants  live  in 
the  cold  zone,  and  only  a  quarter  each  in  the  tem- 
perate and  hot  sections.  The  mean  temperatures 
of  the  cold  zone  are  approximately  those  recog- 
nized as  the  most  favorable  for  physical  exertion, 
but  in  the  hot  country  the  body  struggles  against 
a  handicap  of  almost  20°  F.  more  than  the  65°  at 
which  it  normally  functions  best.  More  signifi- 
cant still  are  the  temperatures  of  all  the  zones  in 
their  relation  to  mental  activity.  The  human 
mind  is  at  its  best  under  the  stimulus  of  a  mean 
temperature  of  about  40°  F,,  but  even  at  Mexico 


28  TRADING  WITH  MEXICO 

City,  7,600  feet  above  sea  level,  the  mean  tempera- 
ture of  winter  is  as  high  as  53°.  In  the  temperate 
and  hot  countries  the  handicaps  under  which  the 
brain  functions  run  to  20°  and  up  to  45°  above  the 
40°  at  which  the  human  mind  works  at  highest 
efficiency.  No  stimulating  winters,  no  clarifying 
cool  spells,  even,  in  the  midst  of  the  endlessly 
beautiful  summers  of  Mexico ! 

Only  the  cold  zone  has  any  advantages  in  tem- 
perature, and  these  advantages  are  equally  im- 
portant with  the  fertility  of  the  soil  in  accounting 
for  the  predominance  of  population  there.  Yet 
even  where  the  temperature  is  favorable  to  at 
least  physical  work,  there  is  the  debilitating  same- 
ness or  the  tropics,  the  assurance  that  there  will 
always  be  more  difference  between  day  and  night 
than  between  the  seasons.  There,  on  the  heights, 
too,  the  nervous  drain  of  altitude  and  of  lack  of 
moisture  in  the  air  takes  the  place — with  no  ad- 
vantage to  the  human  machine — of  the  humidity 
and  heat  of  the  hot  country.  At  every  turn  in 
Mexico  climate  takes  toll  of  human  energy,  even 
if  we  ignore  the  undoubtedly  debilitating  effect 
of  tropical  and  sub-tropical  light  upon  the  white 
men  and  upon  their  mixed-blood  descendants  as 
well. 

All  these  climatic  factors,  then,  have  continuous 
influence  on  the  health  of  all  the  Mexican  people  as 
well  as  upon  Mexican  business.  The  hot,  humid 


NATURE  AND  THE  MARKET    29 

weather  of  the  hot  country  makes  those  who  live 
there  low  in  resistance  of  disease,  while  the  ner- 
vous strain  of  the  altitudes  and  dryness  of  air  in 
the  better  portions  achieves  a  not  dissimilar  result 
in  lowering  resistance.  It  is  axiomatic  that  the 
Mexicans  as  a  people  are  seldom  well  and,  as  has 
been  recorded  in  detail  elsewhere,1  this  ill-health 
has  been  and  is  to-day  one  of  the  determinants  of 
the  relatively  low  state  of  progress  of  the  country. 
No  people  who  are  continually  sick  and  upon  whose 
energies  their  climate  is  a  continuous  drain  can 
work  well  or  achieve  greatly. 

The  relation  of  this  thoroughly  recognized  fac- 
tor of  ill-health  to  Mexican  trade  and  commerce 
must  not  be  overlooked.  It  is  at  the  root  of  much 
of  the  apathy  which  keeps  the  Mexican  people  at 
their  low  ebb  of  business  enterprise.  It  deter- 
mines with  peculiar  insistence  their  predilection 
for  the  easy  road,  the  "manana  habit/'  even  for 
the  dominance  of  outworn  traditional  methods  in 
agriculture  and  in  business.  It  has  a  great  deal 
to  do  with  the  ease  with  which  foreigners  develop 
a  land  which  has  for  centuries  lain  virtually  fal- 
low. But  it  places  vast  difficulties  in  the  way  of 
that  development,  for  it  keeps  the  labor  problem 
continually  in  the  foreground  and  vitiates  much 
of  the  great  advantage  which  the  relative  cheap- 
ness of  that  labor  seems  to  offer.  It  has  and  will 

i  The  People  of  Mexico,  Book  I,  Chap.  V. 


30  TRADING  WITH  MEXICO 

continue  to  have  a  powerful  effect  on  trade,  for 
it  keeps  even  the  enterprising  among  Mexican 
business  men  at  a  low  standard  of  efficiency  and 
makes  it  almost  imperative  that  foreigners,  for 
the  present,  do  most  of  the  jobbing  and  export 
and  much  of  the  retail  trade  and  export  buying  of 
the  country.  This  element  is  too  likely  to  be  lost 
sight  of,  because  it  is  not  a  condition  common  to 
other  lands.  But  it  explains  much  that  seems  at 
first  inexplicable  in  the  difficulties  of  the  American 
exporter  and  importer  in  getting  the  adequate 
representation  in  Mexico  which  he  must  have. 

Another  vitally  important  effect  of  Mexican 
geography  is  the  uncertainty  and  untoward  dis- 
tribution of  rainfall.  This  has  forced  upon  the 
Mexicans  their  diet  of  corn  and  with  it  their  use 
of  fiery  condiments  which  are  probable  causes  of 
the  digestive  disorders  which  ravage  all  classes. 
Moreover,  the  rainfall  conditions  have  been  vitally 
important  in  the  determination  of  the  entire  agri- 
cultural tendency  of  the  country. 

The  seasons  in  Mexico  are  marked,  not  by  win- 
ter cold  and  summer  heat  so  much  as  by  seasons 
of  rain  and  drought.  The  winter  is  the  dry  sea- 
son, roughly  between  October  and  May,  and  the 
summer  is  the  salubrious  rainy  season,  from  June 
to  September.  The  distribution  of  rain  through- 
out the  year  and  the  failure  of  the  rains  in  the 
important  growing  seasons  in  some  of  the  other- 


NATURE  AND  THE  MARKET    31 

wise  fertile  sections  is  due  primarily  to  the  geog- 
raphy of  the  country.  Professor  Ellsworth  Hunt- 
ington,  of  Yale,  the  great  American  climatologist, 
finds  that  Mexico's  summer  rains  are  due  to  the 
vertical  rays  of  the  sun  which  cause  the  rapid 
rising  of  the  heated  air,  with  sudden  expansion 
and  condensation,  first  over  the  low-lying  hot 
country  and  later  on  the  rising  uplands  of  the 
tierra  templada,  where  the  function  of  the  moun- 
tains in  bringing  about  condensation  is  amply 
proven  by  the  well- watered  eastern  slopes  and  the 
dry  western  sides  of  the  ranges. 

This  mountain  contour  and  the  peculiar  shape 
of  the  Mexican  mainland  (very  wide  at  the  north 
in  proportion  to  the  south)  create  another  impor- 
tant climatological  effect — the  broad  stretches  of 
desert  in  the  northern  sections.  The  so-called 
continental  type  of  climate  which  forms  the  Amer- 
ican deserts  further  north  combines  with  the 
mountain  contour  and  the  distance  from  the 
eastern  seashore  (driving  the  rain-clouds  south- 
ward) to  make  immense  sections  of  Mexico  desert, 
capable  of  supporting,  at  best,  only  wandering 
herds.  These  deserts  lie  between  the  broad  arms 
of  the  great  "Y"  of  the  Mexican  mountain 
ranges,  and  combined  with  the  mountainsides 
themselves  render  nearly  three-fourths  of  the  area 
of  Mexico  unfit  for  cultivation,  even  if  irrigation 
were  general. 


32  TRADING  WITH  MEXICO 

The  result  is  that  of  the  500,000,000  acres  of 
land  in  Mexico,  not  more  than  25,000,000  acres 
are  arable.  Great  sections  are  useless,  so  that  in 
the  state  of  Chihuahua,  90,000  square  miles  in  ex- 
tent, only  about  125,000  acres,  or  less  than  two- 
tenths  of  one  per  cent  can  be  cultivated — and  most 
of  that  arable  portion  is  irrigated. 

The  most  fertile  sections  of  Mexico  are  rich 
indeed,  and  in  the  plateau  valleys,  where  alluvial 
deposits  and  lava  dust  have  been  poured  in  to- 
gether to  form  the  soil,  great  crops  can  be  raised 
— when  there  is  rain.  Only  in  a  relatively  limited 
section,  however,  is  rain  sure  to  come  at  the  times 
needed  by  the  crops.  Often  when  it  does  come,  it 
is  in  torrential  downpours  which  are  likely  to  wash 
cultivated  fields  away  in  a  single  night.  It  is  this 
condition  which  makes  the  so-called  tier r a  tem- 
plada,  on  the  slopes  of  the  mountains,  in  many 
ways  the  least  desirable  of  all  the  farming  land 
of  Mexico. 

Uncertainty  of  rainfall  is,  then,  one  of  the  out- 
standing results  of  the  Mexican  climate  as  influ- 
enced by  Mexican  geography.  This  uncertainty 
works  forever  upon  the  mind  of  the  Mexican 
farmer,  making  him  a  hopeless  fatalist,  making  it 
less  than  worth  his  while  to  attempt  scientific  culti- 
vation. If  there  is  rain,  his  crops  are  good  any- 
way, and  if  there  is  not  rain,  the  cost  of  labor  and 
fertilizer  and  good  seed  are  lost.  The  Mexican 


NATURE  AND  THE  MARKET         33 

farmer  is  the  worst  of  gamblers,  and  his  fondest 
hope  is  that  his  average  crop  over  a  period  of 
years  will  be  twenty-five  per  cent  of  normal ! 

Famine  has  ravaged  Mexico  periodically  for 
thousands  of  years.  It  is  most  interesting,  in  look- 
ing at  the  present  stage  (when  the  largest  items 
of  import  are  foodstuffs),  to  realize  that  it  has 
probably  been  only  the  much-abused  hacienda  sys- 
tem which  has  saved  Mexico  from  severe  ravages 
of  recent  famine.  The  hacienda  system,  which 
is  the  operation  of  huge  estates  under  an  elaborate 
overseership,  approaches  as  nearly  as  the  living 
conditions  of  the  country  permit  to  a  business- 
like administration  of  the  farming  of  the  land.  It 
was  the  stable  factor  in  Mexican  food  production 
in  the  time  of  the  Spaniards  and  in  the  later  era 
of  Diaz. 

The  small  farmer  of  Mexico  has  worked,  since 
the  beginning  of  Indian  history,  without  a  thought 
of  supplying  the  market  and  thus  feeding  the  in- 
dustrial workers  of  the  towns.  He  has  lived  from 
hand  to  mouth,  and  only  when  he  chances  to  have 
a  surplus  does  he  transport  it  or  sell  it  on  the 
ground  for  the  needs  of  the  city  market.  So  true 
is  this  that  in  the  period  of  mining  and  industrial 
expansion  under  Diaz,  the  draining  of  the  labor 
from  the  haciendas  to  the  mines  and  to  the  few 
factories  had  an  immediate  effect  on  the  food  pro- 
duction, and  the  imports  of  foreign  corn  and  wheat 


34  TKADING  WITH  MEXICO 

grew  almost  in  exact  proportion  to  the  diversion 
of  this  labor  to  industry.  The  small  farmers,  the 
Indians  and  peons,  who  had  places  of  their  own 
or  worked  in  the  village  commons,  did  not  go  to 
the  mines,  but  continued  their  relatively  easy  ex- 
istence on  their  own  little  fincas.  They  learned 
only  slowly  the  possibilities  of  the  increased  mar- 
ket for  their  product,  and  only  to  an  infinitesimal 
degree  did  they  rise  to  meet  that  market. 

To-day,  with  the  shutting  down  of  hundreds  of 
the  haciendas,  and  the  return  of  the  country  to  its 
primeval  agriculture,  the  situation  has  become 
extremely  serious,  and  the  food  importations  have 
grown  out  of  all  proportion  to  the  industrial 
growth  of  the  country;  in  fact,  almost  in  inverse 
ratio  to  the  industrial  depression  of  the  country. 

This  presents  a  serious  problem,  but  it  also 
presents  a  promise  of  new  opportunity  when 
peace  comes  to  Mexico.  For  then  there  must  come 
a  revival  of  large-scale  farming,  the  growth  of  a 
new  farming  system,  and  with  it  a  tremendously 
increased  market  for  modern  farm  implements. 
There  has  been  much  talk,  on  the  part  of  the  revo- 
lutionary governments,  of  the  needs  of  the  new 
small  farmers  for  agricultural  machinery,  but  this 
is  almost  entirely  talk,  for  the  new  small  farmers 
are  only  falling  back  to  the  way  of  their  ances- 
tors, and  are  not  in  any  sense  taking  the  place  of 
the  ruined  haciendas  in  food  production  for  the 


NATURE  AND  THE  MARKET    35 

cities  and  industrial  sections.  That  development 
will  probably  come  in  the  form  of  an  entirely  new 
system  of  agriculture,  in  which  foreign  machinery 
and  of  necessity  foreign  capital  must  have  a  vital 
part. 

One  of  the  inevitable  developments  of  Mexican 
agriculture  must  be  in  the  direction  of  irrigation. 
There  is  literally  not  enough  good  accessible  land 
which  will  produce  without  irrigation  to  feed  the 
country  or,  what  is  more  important,  to  make  an  in- 
crease of  population  possible.  This  land  must  be 
created  by  irrigation,  and  irrigation,  owing  to  the 
geographical  formation  of  the  country,  must  of 
necessity  be  carried  out  by  great  capital.  Many 
of  the  village  communes  have  irrigation  systems, 
of  a  crude  sort.  Water  is  brought  from  distant 
streams,  where  it  flows  after  the  rainy  season,  and 
in  some  places  it  is  brought  up  from  the  under- 
ground streams  by  means  of  crude  water-wheels 
operated  by  man-power.  But  the  total  area 
watered  by  such  irrigation  is  relatively  insignifi- 
cant, and  as  dams  can  be  built  in  Mexico  only  at 
large  cost,  the  true  development  of  Mexican  irri- 
gation waits  on  peace,  on  foreign  capital  and  gov- 
ernment investment  and  encouragement. 

Something  of  this  sort  had  been  begun  before 
the  present  era  of  revolutions.  In  the  closing 
years  of  the  Diaz  regime  (before  1911)  many 
franchises  were  granted  to  large  private  com- 


36  TRADING  WITH  MEXICO 

panies  which  planned  irrigation  projects,  and  the 
sum  of  90,000,000  pesos  was  ordered  expended  on 
government  irrigation  over  a  period  of  years.  A 
few  of  the  private  companies  had  put  their  plans 
into  execution,  and  many  others,  on  the  way  to  ac- 
complishment, were  nipped  and  destroyed  by  the 
subsequent  revolutions.  For  the  past  ten  years, 
nothing  has  been  done  toward  solving  the  problems 
of  irrigating  the  fertile  but  unwatered  lands  of 
Mexico,  and  it  seems  hardly  likely  that  anything 
will  be  done  under  the  threats  of  confiscation 
which  now  hang  over  all  great  enterprise  there. 

Rainfall  conditions  have  had  much  to  do  with 
the  overemphasis  on  the  land  problem  and  indeed 
with  fche  failure  of  succeeding  governments  to 
solve  that  problem.  As  in  all  arid  countries,  water 
rights  were  originally  more  important  to  the  na- 
tives than  were  land  rights.  In  hundreds  of  the 
Indian  communes  which  still  persist,  the  commu- 
nal rights  of  the  Indians  are  distributed,  not  on 
the  basis  of  land  assigned,  but  of  the  water  al- 
lowed; each  Indian  receives  a  proportion  of  the 
water  brought  by  the  communal  irrigation  ditches, 
and  may  take  three  or  four  times  the  amount  of 
land  which  his  water  will  irrigate — for  crop  ro- 
tation, forage,  etc.  This  inevitable  emphasis  on 
water  has  perhaps  had  its  part  in  directing  the  at- 
tention of  the  Indians  in  their  demands  for  land 
distribution,  toward  the  cultivated  haciendas 


NATURE  AND  THE  MARKET    37 

where  water  is  available.  But  it  also  gives 
promise  for  a  future  which  will  make  possible  the 
rehabilitation  of  the  country  through  great  irriga- 
tion projects  creating  thousands  of  rich  small 
tracts  available  for  distribution  to  industrious  na- 
tives— and  foreign  small  farmers  as  well.  In  the 
government  franchises  given  under  Diaz  to  pri- 
vate irrigation  projects,  provision  was  made  that 
about  one-third  of  the  land  brought  into  cultiva- 
tion should  be  turned  over  to  the  government  for 
distribution  to  small  native  farmers. 

Aside  from  the  indirect  effect  of  these  rainfall 
conditions,  they  have  determined,  with  imperative 
insistence,  the  type  of  agriculture  which  is  fol- 
lowed in  Mexico,  and  so  have  affected  her  trade 
in  foods  and  raw  materials.  They  have  made 
corn  (maize)  the  staple  food  of  the  country,  as 
wheat  is  the  staple  of  the  lands  where  there  is  win- 
ter snow  and  regular  rainfall  throughout  the  year. 
They  have  allowed  the  development  of  only  the 
tropical  products  like  coffee,  sugar  and  rubber  in 
the  rich  districts  of  Vera  Cruz  and  Oaxaca  which 
were  partially  opened  by  foreign  stock  companies 
under  Diaz.  They  have,  more  than  all,  enthroned, 
as  the  only  important  agricultural  export  of  Mex- 
ico, the  sisal  hemp  of  Yucatan.  This  desert  prod- 
uct, which  requires  slow  growth  for  the  maturing 
of  the  long  stout  fibers  which  make  rope  and 
binder  twine,  is  the  greatest  export  of  Mexico 


38  TRADING  WITH  MEXICO 

which  is  the  product  of  Nature's  'bounty  and 
human  enterprise.  Coffee  and  some  rubber  and 
tobacco  and  a  little  sugar  were  raised  for  export 
in  happier  days,  but  only  sisal  hemp,  the  product 
of  the  desert  henequen  plant,  has  become  a  wealth- 
producer  in  any  great  quantity.  Mexico  has  long 
been  an  importer  of  foodstuffs,  for,  as  I  have 
noted,  before  the  days  of  modern  commerce, 
famine  came  with  terrible  regularity.  Under 
Diaz,  food  was  imported  in  increasing  quantities, 
and  since  his  fall,  Mexico  has  been  utterly  depen- 
dent on  the  outside  world  for  a  large  portion  of 
the  nutriment  of  her  people. 

It  is  impossible  now  to  predict  when  and  how 
Mexico  will  become  an  agricultural  country  in  fact 
as  well  as  in  potentialities.  Irrigation  must  come, 
for  only  when  it  does  will  agriculture  and  the  pros- 
perity of  agriculture  fill  the  land.  In  one  section 
where  irrigation  has  been  carried  out  on  a  large 
scale — the  Laguna  district  near  Torreon,  Coah. — 
cotton  is  grown  in  quantity.  This  product  feeds 
into  the  native  industry  of  cotton  weaving  which 
flourishes  near  Orizaba  and  in  other  sections 
where  local,  direct  water-power  is  available. 

It  seems  inevitable  that  the  increase  in  irrigated 
lands  will  add  to  the  acreage  of  cotton  and  also 
to  the  number  and  importance  of  agricultural 
products  of  the  class  of  raw  materials.  The  coun- 
try which  irrigation  will  water  in  Mexico  is  of 


NATURE  AND  THE  MARKET          39 

vast  extent,  and  is  safely  comparable,  even  at  its 
worst,  with  what  the  lands  of  Utah  and  California 
and  the  Imperial  Valley  were  before  water  was 
brought  to  them.  Again,  however,  we  wait  on 
peace  and  on  the  great  works  of  modern  scientific 
irrigation.  And,  however  enthusiastic  we  may 
be  as  tradesmen,  our  capital  will  not  be  rushing  to 
seek  Mexican  investments  of  this  sort  until  civi- 
lized government  again  rules,  with  a  promise  of 
relative  permanency. 

The  desert  character  of  the  country  in  the  north 
was  responsible  for  the  establishment  of  a  great 
eattle-raising  industry,  for  the  land  was  cheap 
and  the  ranges  were  vast.  This  has  to-day  been 
virtually  wiped  out,  and  Mexico  imports  meat 
from  the  United  States — all  the  result  of  revolu- 
tion, so  that  when  peace  comes  the  cattle  industry 
will  surely  be  revived.  But  always  the  cattle  of 
northern  Mexico  have  been  of  the  range,  still  unfit 
for  profitable  slaughter,  and  sections  suitable  for 
their  fattening  have  been  badly  needed.  There 
was,  in  other  days,  much  shipment  of  range  cattle 
into  the  United  States,  and  to  the  better  watered 
southern  sections  of  Mexico.  But  although  peace 
will  bring  a  revival  of  the  ranges,  Mexico  cannot 
look  forward  to  becoming  a  great  meat-producing 
country  until  the  irrigation  problem  is  solved. 

There  are  rich,  well-watered  sections  of  Mexico 
— this  must  not  be  overlooked — but  these  have 


40  TRADING  WITH  MEXICO 

resulted  in  a  crowding  of  population  on  the  pla- 
teaus and  through  the  rich  valleys  such  as  that  of 
the  Lerma  river  in  Jalisco  state,  and  have  con- 
tributed but  little  toward  the  broad  development 
of  the  country.  In  fact,  one  of  the  characteristics 
of  Mexico's  population  distribution  has  been  the 
tendency  to  gather  into  groups,  so  that  a  great 
city  like  the  capital  or  like  Guadalajara  or  Puebla 
will  have  a  dozen  cities  and  villages  of  considera- 
ble size  close  about  it — and  then  stretches  of 
sparsely  populated  country  for  leagues  until 
another  group  is  found.  This  is  essentially  cli- 
matic— and  geographical. 

The  mountain  contour  of  the  country  and  this 
same  grouping  of  the  important  centers  of  popu- 
lation have  been  the  chief  influences  in  the  loca- 
tion of  the  railways.  Owing  to  the  absence  of  nav- 
igable streams,  the  mere  possibility  of  Mexico's 
industrial  and  of  even  her  true  national  develop- 
ment had  to  wait  upon  the  coming  of  the  railways. 
The  first  line  was  that  completed  in  1872  by  Eng- 
lish capital  between  Vera  Cruz,  the  chief  port  of 
the  Gulf  of  Mexico,  and  the  City  of  Mexico,  some 
400  miles  inland  and  a  mile  and  a  half  above  the 
level  of  the  port.  This  "Mexican  Railway" 
touches  the  groups  of  cities  along  the  old  Spanish 
highway,  and  gave  them  an  industrial  primacy 
which  was  unchallenged  until  the  very  last  years 
of  the  Diaz  peace. 


NATURE  AND  THE  MARKET    41 

After  the  building  of  this  first  line  railway  con- 
struction turned  to  follow  the  great  natural  ave- 
nues laid  out  by  the  mountain  valleys.  There 
were,  as  we  have  seen,  two  main  valleys,  that  be- 
tween the  Eastern  and  Western  Mother  ranges, 
and  that  to  the  east  of  the  Eastern  chain.  Look- 
ing at  a  map  of  Mexico,  the  most  casual  observer  is 
struck  by  the  fact  mentioned  more  than  once  by 
Mexican  revolutionists,  that  both  these  valleys 
lead  directly  to  the  heart  of  the  United  States. 
The  railroads  which  were  built  there  might  in- 
deed be  taken  to  have  been  built  to  drain  Mexico 's 
resources  into  the  United  States.  But  it  was  only 
because  these  roadbeds  had  been  laid  out  by  Na- 
ture herself  that  the  lines  came  to  be  built  there, 
with  the  inevitable  result  of  increasing  immeas- 
urably the  importance  of  the  United  States  to 
Mexican  development.  One  early  Mexican  presi- 
dent (Sebastian  Lerdo  de  Tejada,  1872-76),  in 
fact,  refused  to  allow  these  obvious  roads  to  be 
built,  explaining,  in  a  much-quoted  phrase:  "Be- 
tween the  weak  and  the  strong,  let  the  desert  re- 
main. ' ' 

The  roads  were  both  built  by  American  com- 
panies under  President  Diaz,  the  Mexican  Na- 
tional on  the  east,  the  Mexican  Central  on  the 
west.  They  had  a  mighty  part  to  play  in  the  mod- 
ernizing of  Mexico,  and  in  her  development 
through  the  trade  in  the  minerals  and  in  the 


42  TRADING  WITH  MEXICO 

building  of  such  industries  as  followed  them. 
Throughout  their  history  to  the  present,  they  have 
been  of  far  greater  importance  to  Mexico  than  to 
her  allegedly  covetous  northern  neighbor. 

After  these  lines  were  built,  others  came,  to  fol- 
low the  mountain  valleys.  One  went  from  Mexico 
City  westward  to  Guadalajara,  tapping  the  rich 
Valley  of  the  Lerma,  the  granary  of  Mexico.  Nar- 
row gauge  lines  twisted  through  the  rich  states 
of  Mexico  and  Michoacan,  lines  which  when  mod- 
ernized and  extended  in  some  future  time  will 
open  agricultural  and  mining  territory  compara- 
ble to  anything  yet  known  to  commerce  and  Mexi- 
can industry.  Another  line  found  its  way  to  Oax- 
aca,  deep  in  the  mountains  to  the  east  and  south  of 
Mexico  City.  Others  followed  the  seacoast  to  the 
Isthmus  of  Tehuantepec,  and  crossed  that  narrow, 
shallow  neck  of  land  to  the  Pacific. 

Along  the  western  slope  of  the  Sierra  Madre 
other  lines  were  built  through  Sonora,  and  then 
the  Southern  Pacific  of  Mexico,  an  American  com- 
pany, pushed  these  roads  still  further  southward, 
opening  new  territory,  not  to  the  commerce  of 
Central  Mexico,  but  to  that  of  the  United  States. 
And  last  of  all,  the  line  to  Guadalajara  left  its 
easy  grades  and  smooth  roadbed  to  leap  the  bar- 
rancas and  climb  down  the  mountains  to  achieve 
the  contact  with  the  Pacific  at  Manzanillo.  A 
mighty  hand,  indeed,  has  nature  had  in  the  locat- 


NATURE  AND  THE  MARKET    43 

ing  of  Mexico  Js  railway  lines,  and  with  their  con- 
nection to  the  United  States  and  our  trade. 

The  mountainous  character  of  the  Mexican  ter- 
ritory has  upturned  vast  mineral  resources,  whose 
effect  on  the  development  of  the  country  has  been 
greater  perhaps  than  any  other  single  fact.  These 
minerals  gave  the  wealth  of  the  Aztecs  which 
tempted  the  Spaniards  to  take  and  to  develop  the 
country  so  thoroughly.  They  were  drained  for  the 
three  centuries  that  Spain  ruled,  and  their  exploi- 
tation shaped  all  the  policy  of  the  colonial  regime. 
They  were  the  greatest  of  the  attractions  to 
foreign  capital  at  the  beginning  of  the  Diaz  rule, 
and  they  paid  most  of  the  revenue  of  taxes  upon 
which  the  material  civilization  of  the  Mexico  of 
that  day  was  built.  It  seems  safe  to  promise  that 
when  there  is  lengthened  peace  again  in  Mexico, 
mining  will  take  its  place  with  the  greatest  indus- 
tries of  the  country — although  oil  may  still  retain 
its  present  primacy  when  it,  too,  can  spread  out 
and  develop  itself. 

Mining  camps  and  groups  of  mining  camps  dot 
the  country,  and  whole  distinct  territories  are  de- 
voted to  the  mining,  here  of  silver,  there  of  gold, 
there  of  copper,  lead,  etc.  Indeed,  the  geography 
of  Mexico  has  had  a  tremendous  effect  in  the  crea- 
tion there  of  a  country  primarily  rich  in  minerals 
as  she  is  poor  in  agriculture.  Oil  is  to-day  the 
greatest  single  wealth  of  Mexico,  but  the  other 


44  TRADING  WITH  MEXICO 

minerals  have  had  and  will  again  have  their  im- 
portant bearing  on  her  development. 

The  mineral  wealth  (oil  as  well  as  metals)  has 
as  I  have  noted  been  the  chief  attraction  which  has 
brought  foreign  capital  to  Mexico.  The  Span- 
iards and  to  a  lesser  extent  the  Indians  before 
them,  mined  the  mountains  of  Mexico,  but  it  re- 
mained to  foreign  enterprise  in  the  time  of  Diaz 
to  open  up  the  great  bonanza  sections  to  scientific 
development.  In  the  train  of  this  development, 
came  more  foreign  capital  of  every  sort,  for  agri- 
culture, for  industry,  for  oil,  and  for  public  serv- 
ice investment.  This  foreign  capital,  developing 
Mexico's  latent  wealth,  opened  her  to  the  world, 
and  brought  forth  her  great  promise  of  the  fu- 
ture, even  though  it  also  gave  to  the  revolution- 
ists who  overthrew  Diaz  a  handy  battle  cry  of  anti- 
foreignism. 

It  seems  unlikely  that  without  the  geographical 
and  geological  conditions  which  offered  the  wealth 
of  minerals  to  the  development  of  capital,  Mexico 
would  or  could  have  entered  upon  the  modern 
stage  of  her  development.  In  that  was  the  hope 
of  the  past  and  in  it,  too,  is  the  hope  of  the  future 
regeneration  of  Mexico.  The  tempting  possibili- 
ties of  such  development  are  the  only  bait  which 
will  bring  back  to  Mexico  the  stream  of  foreign 
capital  to  which  alone  she  can  look  for  her  prompt 
salvation,  when  peace  comes  at  last. 


NATURE  AND  THE  MARKET          45 

The  geography  and  climate  have  had  their  hand, 
too,  in  the  industrial  situation  in  Mexico.  Mining, 
in  the  time  of  Diaz,  drained  the  available  labor 
away  from  the  farms  and  away  from  the  small 
factories  which  then  existed.  The  oil  fields  have 
more  recently  taken  a  large  proportion  of  the 
available  workers.  The  supply  of  labor  in  Mex- 
ico is  astonishingly  small — the  development  of 
the  latent  labor  supplies  in  the  Indian  communes 
waits  on  peace  and  education.  Temperamentally 
(and  in  this  we  find  the  hand  of  climate)  the  Mex- 
ican is  not  a  good  factory  worker.  The  raw  prod- 
ucts which  the  land  produces,  sisal  hemp,  cotton, 
rubber,  etc.,  all  demand  for  their  profitable  manu- 
facture large  and  intricate  plants,  such  as  Mexico 
has  not  built  and  for  whose  operation  she  has 
never  trained  her  people.  Therefore,  save  for  the 
cotton  factories  (which  produce  only  the  coarser 
staples)  there  is  to-day  in  Mexico  almost  no  in- 
dustrial development.  The  lists  of  industries  of 
which  such  a  manufacturing  town  as  Monterey 
boasts,  include,  for  instance,  candle  and  match 
factories  employing  thirty  or  forty  people,  brass 
bed  " factories,"  where  the  products  of  American 
foundries  are  put  together,  soda  water  factories — 
the  industries  which  no  city  in  any  other  land 
would  find  worth  mentioning.  Mexican  industry, 
indeed,  waits  surely  upon  the  development  of  the 
crops  of  raw  materials,  upon  the  education  of  her 


46  TRADING  WITH  MEXICO 

laboring  classes,  and  upon  the  solution  of  the 
problems  of  irrigation  and  water  power. 

Geography  and  climate  have  been  cruel  to  Mex- 
ico,— of  this  we  need  not  seek  to  deceive  ourselves. 
But  throughout  the  list  of  unhappy  conditions 
which  has  been  set  down  here  there  runs  a  prom- 
ise of  advancement  and  of  better  things — when 
peace  comes  and  when  foreign  enterprise  shall 
again  be  welcomed.  All  of  the  advance  which 
Mexico  has  made  in  her  long  fight  against  an  un- 
kind Nature  has  been  made  with  the  help  of  for- 
eign energy.  First  was  Spain,  and  the  300  years 
in  which  she  built  up  the  colony  to  a  semblance  of 
a  modern  state,  creating  great  cities  and  peace 
and  prosperity.  Then,  after  fifty  years  of  de- 
structive revolution,  Diaz,  and  his  wise  invitation 
to  and  use  of  foreign  enterprises  and  foreign 
money.  Only  in  these  two  periods  has  Mexico 
been  prosperous. 

The  greatest  advance  was  under  Diaz,  when  in 
thirty  years  Mexico  rose  from  the  ashes  of  her 
revolutions  and  flew  toward  the  heights  of  com- 
mercial advancement.  In  that  time  her  railways 
were  almost  all  of  them  built,  all  the  water  power 
which  she  now  has  developed,  the  one  great  and 
productive  irrigation  section — the  Laguna  cotton 
district — reclaimed  from  the  desert,  the  sisal  hemp 
industry  created,  the  factories,  such  as  they  are, 
built  and  set  in  operation.  Virtually  all  of  these 


NATURE  AND  THE  MARKET    47 

advances  were  made  with  foreign  capital  and 
under  the  control  of  foreign  engineers  and  mana- 
gers. Success  rewarded  the  faith  and  the  efforts 
of  all  who  devoted  themselves  to  these  develop- 
ments and  it  was  their  conquering  of  the  great 
natural  handicaps  of  Mexico  which  made  possible 
the  glowing  tales  of  her  " treasure-house."  When 
such  times  as  those  come  again,  and  only  when 
they  come,  will  the  battle  against  Nature  be  re- 
sumed, and  in  its  resumption,  the  signs  of  man's 
great  conquest  reappear. 


CHAPTER  III 

THE  PEOPLE  WHO  BUY 

A  BAMBOO  hut  with  a  clumsy  thatch  of  grass,  a 
hovel  of  sundried  bricks,  made,  as  the  Israelites 
made  them,  of  straw  and  clay,  a  shack  of  unfin- 
ished lumber  or  rotting  railway  ties  topped  with  a 
roof  of  laminated  sheet-iron — these  are  the  sym- 
bols of  the  social  level  of  Mexico.  Within  them  all 
a  dirt  Soor,  a  box  filled  with  earth  for  a  brazier, 
two  or  three  earthenware  pots,  a  metate  over 
which  the  woman  bends  at  her  endless  task  of 
grinding  meal  for  the  family  cakes  of  unleavened 
corn,  a  few  rush  mats  for  beds  and  a  tawdry 
shrine  with  a  dim  light  before  it — the  inert  mil- 
lions of  Mexico  live  to-day  as  they  have  lived  for 
a  thousand  years. 

Their  minds  untutored,  their  thoughts  and  de- 
sires confined  literally  to  the  animal  plane,  their 
religious  instincts  almost  entirely  superstition, 
their  government  the  support  of  rulers  upon  the 
vast  misery  of  the  lowly,  Mexico  finds  her  parallels 
only  in  China  and  in  Turkey.  And  Mexico  is  at 
our  own  back  door,  the  cynosure  of  our  most  hope- 
ful tradesmen ! 

48 


THE  PEOPLE  WHO  BUY  49 

Up  until  ten  years  ago,  there  was  an  aristoc- 
racy in  Mexico  counting  in  its  make-up  many  able 
men,  groups  of  able  men,  devoted  as  far  as  their 
lights  allowed  them,  to  a  paternalistic  care  of  the 
Indians  and  peons,  and  to  the  development  of  Mex- 
ico as  a  great,  modern  state.  Under  Diaz  there 
was  also  a  slow  building  of  a  material  civilization, 
looking,  in  the  future,  to  the  filling  of  the  peon 
stomach  and  the  lifting  of  the  peon  mind  through 
education  to  the  light  of  the  white  man's  world,  to 
a  place  in  the  white  man's  commerce.  It  has  been 
the  common  usage,  in  this  past  decade  since  Diaz 
fell,  to  excoriate  that  aristocracy,  to  blame  it  for 
all  the  evils  of  the  country,  to  point  with  bitter 
scorn  at  its  wealth,  at  its  material  monuments  of 
churches  and  palaces  and  mines  and  railways. 
And  yet,  although  these  ten  years  of  revolutions 
have  been  devoted  most  effectively  to  the  elimina- 
tion of  the  Mexican  upper  classes  and  of  their 
materialism  and  its  monuments,  the  condition  of 
the  lower  classes  has  not  been  alleviated  by  one 
tiny  burden,  nor  has  it  been  lifted  by  one  hair's 
breadth. 

The  Mexicans  of  to-day  are  worse  off  than  they 
were  in  the  days  of  Diaz ;  they  are  worse  off  than 
in  that  wild  revolutionary  period  before  Diaz;  I 
am  not  so  sure  that  they  are  not  in  worse  condi- 
tion than  they  were  under  the  Spaniards,  for  they 
seem  literally  to  be  sliding  back  to  an  era  of  bar- 


50  TRADING  WITH  MEXICO 

barism  like  only  to  that  misery  which  was  theirs 
before  the  Spaniards  came. 

We  lose  sight  of  the  essential  fact  of  Mexico, 
commercially  as  well  as  socially,  if  we  lose  sight 
for  one  moment  of  the  lowest  of  the  Mexican  peo- 
ple. They  present  to  us  our  first  and  greatest 
problem,  whether  we  are  traders,  missionaries,  or 
those  who  seek  to  develop  Mexico's  resources  or 
to  sell  her  our  goods. 

It  is  they  who  must  buy  our  merchandise  or  aid 
our  work  or  operate  our  factories,  mines  and  oil 
wells.  They  were,  and  are,  a  vast  potential  market, 
a  great,  slow-moving  force  for  us  to  re-shape  by 
education  into  an  advanced  people,  civilized,  pro- 
gressive, using  the  products  of  the  world  and  pour- 
ing their  own  products  back  into  the  stream  of 
commerce.  They  offer  us  an  immense,  a  wonder- 
ful well  of  labor,  perhaps  a  greater  contributant 
to  the  nation's  future  wealth  than  anything  else 
in  all  Mexico.  Because  of  these  potentialities  and 
because  of  our  inability  to  understand  why  such 
possibilities  do  not  find  their  development,  it  is 
vital  that  we  look,  clear-eyed  and  sympathetically, 
on  the  one  great  and  overwhelming  factor  in  that 
hopeless  inertia — the  ignorance  of  the  mass  of  the 
Mexicans. 

Mexico  is  a  land  of  innumerable  children.  A 
land  where  there  are  twice  as  many  children  under 
ten  years  old  as  there  are  in  the  United  States  (in 


THE  PEOPLE  WHO  BUY  51 

proportion  to  population).  And  a  land  where  not 
one  child  in  six  has  even  the  chance  to  go  to  school, 
because  there  are  no  schools  for  them. 

The  depth  of  Mexico's  ignorance,  in  childhood 
and  in  adulthood,  in  life  and  in  business,  literally 
passes  comprehension.  The  active,  curious  minds 
of  the  Indian  youngsters  grow  quickly  into  sodden 
stupidity;  the  keen  and  vivid  intelligences  of  the 
children  of  the  middle  and  upper  classes  expend 
their  growing  forces  in  sensuality  and  plunge 
themselves  and  their  country  into  debilitating  ex- 
cesses— because  there  is  no  training  to  give  them 
a  life  above  the  animals. 

I  have  seen,  in  the  seats  of  government  in  Mex- 
ico, men  who  know  less  of  world  history  than  a  boy 
in  an  American  high  school;  I  have  talked  with 
"experts"  of  government  departments  who  knew 
less  of  their  special  subjects  than  did  I,  a  layman. 
I  have  seen  in  the  presidential  chair  men  who  be- 
lieved, literally,  that  the  shrunken,  sick  Mexico  of 
to-day  was  one  of  the  great,  advanced  countries 
of  the  world — because  they  had  no  conception  of 
the  development  of  world  civilization. 

I  have  seen,  in  Mexican  homes,  the  slow  murder 
of  Mexican  babies,  because  neither  I  nor  any  one 
else  could  change  the  round  of  tradition,  unre- 
lieved by  training  of  any  sort,  which  takes  an  an- 
nual toll  of  child  life  in  Mexico  that  is  perhaps  not 
surpassed  even  by  the  toll  of  the  famine  in  China. 


52  TRADING  WITH  MEXICO 

The  chain  of  tradition  links  Mexico  together, 
and  links  her,  too,  to  a  past  which  goes  back  into 
tlje  furthest  reaches  of  prehistoric  legend. 

The  ways  of  modern  agriculture  are  those  of 
the  early  Aztecs,  and  modern  tools,  even,  are  in- 
troduced with  the  greatest  difficulty.  The  round 
of  life  is  a  brief  cycle  of  dull  days,  unlivened  by 
any  thought  or  knowledge  beyond  the  confines  of 
a  village  or  a  township  or  a  few  blocks  of  a  city. 
The  schools,  such  as  they  are,  are  patterned  after 
models  long  abandoned  everywhere  else  in  the 
world,  and  are  stifled  by  a  traditional  belief  that 
war  and  revolution  and  the  erection  of  imposing 
buildings  are  more  important  to  the  progress  of 
the  country  than  the  education  of  its  youth. 

All  this  has  driven  Mexico  on  through  the  years 
handicapped  with  a  load  of  illiteracy  that  can  well 
be  recognized  as  the  most  potent  factor  in  the  de- 
generation that  marks  her  every  manifestation 
to-day. 

Only  figures  can  tell,  even  in  part,  the  depths  of 
that  ignorance.  Back  in  1895,  the  Mexican  gov- 
ernment reports  (which  one  must  always  remem- 
ber speak  as  favorably  as  they  dare)  showed  that 
only  2,000,000  out  of  a  population  of  12,500,000 
could  read  and  write!  This  means  that  82  per 
cent  of  all  the  people  of  Mexico  were  without 
these  rudiments  of  learning.  By  1900  this  per- 
centage had  been  reduced  to  80  and  in  1910  the 


THE  PEOPLE  WHO  BUY  53 

Diaz  government  claimed  that  it  had  been  reduced 
to  78,  in  other  words  that  of  the  15,000,000  popu- 
lation of  that  year,  a  little  over  3,000,000  could 
read  and  write,  while  nearly  12,000,000  remained 
in  the  depths  of  their  ignorance.  In  1919,  the 
Carranza  government  issued  a  report  claiming  but 
a  slight  advance  over  these  figures  in  the  nine 
years  since  the  fall  of  Diaz. 

It  is  literally  true  that  not  a  tenth  of  all  the  peo- 
ple in  Mexico  have  what  we  would  call  a  common 
school  education,  and  three  out  of  four  cannot  read 
a  street  sign  or  scrawl  their  own  names.  Indeed, 
one  great  British  mining  company  reported  that 
of  its  595  Mexican  employees,  including  scores  of 
what  we  would  call  skilled  workmen,  only  six,  or 
about  one  per  cent  could  sign  a  receipt  for  the 
money  they  were  paid. 

To  those  of  us  who  look  on  through  foreign  eyes, 
this  condition  explains  much  of  Mexico's  dilemma, 
and  the  point  is  further  clarified  when  we  know 
that  the  greatest  claim  ever  made  for  Mexican 
education  showed  but  12,000  schools,  with  850,000 
pupils  enrolled — while  the  population  of  children 
of  school  age  was  more  than  4,000,000 !  No  single 
issue  is  greater  or  more  pressing  than  education. 
Yet  education  waits,  as  everything  in  Mexico 
waits,  on  peace  and  better  times,  on  food  and  on 
health.  And  these  wait — and  more  than  all,  from 
our  selfish  interest,  business  and  commerce  wait — 


54  TEADING  WITH  MEXICO 

on  education!  Around  and  around  the  problem 
swings,  and  each  issue  is  dependent  upon  another, 
and  that,  then,  upon  the  first. 

Of  all  the  complicated,  interwoven  factors  of 
Mexican  life  and  of  the  tendencies,  this  very  day, 
of  Mexican  business  and  trade  none,  however, 
offers  so  true  an  understanding  as  race.  The 
basis  of  Mexico's  ignorance  and  the  basis  of  her 
steel-bound  traditions  is  Indianism.  For  Mex- 
ico's 15,000,000  people  include  6,000,000  pure- 
blooded  Indians,  of  some  fifty  tribal  strains,  lit- 
eral aborigines  in  their  life  and  in  their  thoughts. 
There  are,  as  I  have  noted,  8,000,000  mixed-bloods, 
three-quarters  of  whom  are  virtually  Indians  in 
their  way  of  life  and  in  their  outlook  upon  the 
world.  And  there  are  only  1,000,000  of  white 
strain,  mostly  Spanish,  a  group  which  is  to-day 
without  voice  in  the  affairs  of  the  country.  Two- 
thirds  of  Mexico  is  Indian,  and  most  of  the  other 
third  a  mixture  of  Indian  and  white,  a  mass  with 
the  dark  Indian  sea  below  it  and  virtually  no  light 
coming  to  it  from  above. 

To-day  there  sifts  into  the  Mexican  ruling 
classes — these  same  mixed-bloods — hardly  a  ray 
of  culture,  hardly  a  gleam  of  a  truly  broader  out- 
look, to  lift  them  and  their  people  out  of  the  dull 
cavern  of  their  circumscribed  life,  or  to  lead  them 
to  the  better  things  of  modern  civilization  and 
commerce.  We  talk  of  the  heathen  of  China,  of 


THE  PEOPLE  WHO  BUY  55 

the  darkness  of  ignorance  and  superstition  in 
Africa,  but  in  Mexico  the  churches  and  the  foreign 
industrial  concerns  seem  to  me  to  face  a  greater 
need  than  in  any  other  country  in  the  world. 

For  Mexico  is  at  our  door,  and  the  cultural  tra- 
ditions of  Mexico  are  those  of  our  own  world,  the 
white.  For  300  years  she  was  a  subject  state  of 
Spain,  and  for  all  the  mistakes  of  the  Spaniards 
and  the  Roman  Catholic  Church,  the  foundation- 
stones  they  laid  are  as  the  foundation  stones  of 
our  own  life. 

The  Indian  mass  was  the  great  problem  of 
Spain ;  it  was  the  great  problem  of  Diaz ;  it  is  the 
great  problem  of  all  those  who  would  lead  her  to 
the  ways  of  the  world  of  to-day.  For  the  past  ten 
years  it  has  been  forgotten,  lost  in  the  struggles 
of  individual  men  for  personal  power.  But  always 
those  individuals  have  been  swallowed  up,  without 
their  realizing  it,  in  the  mire  of  Indianism,  for  In- 
dianism,  the  very  epitome  of  ignorance,  lies  there 
always  beneath  the  Mexico  that  the  world  sees, 
waiting  to  engulf  its  own  masters  and  to  destroy 
all  social  and  business  progress.  The  Spaniards 
and  Diaz  built  above  these  shifting  sands,  ever 
conscious  of  them,  providing  against  them  always. 
Diaz  fell  because  after  he  built  his  foundations  he 
did  not  reach  down  into  the  Indian  mass  to  up- 
raise them.  He  fell  in  his  old  age,  forgetting,  as 
old  men  forget,  the  dangers  which  have  been  with 


56  TRADING  WITH  MEXICO 

them  through  all  their  life.  But  before  he  fell  he 
had  laid  the  foundations,  building  upon  those  of 
the  Spaniards  and  erecting  new  ones  of  his  own, 
among  them  foundations  of  foreign  business,  of 
foreign  missions,  of  foreign  schools,  business  and 
missions  and  schools  which  by  their  own  enter- 
prise and  perhaps  as  much  by  the  examples  which 
they  set  for  Mexican  business,  Catholic  churches 
and  native  school  teachers,  were  beginning  the 
great  uplift  of  that  vast,  inert  Indian  mass. 

The  brief  rule  of  Madero  (1911-1913)  was  the 
link  between  Diaz  and  the  upheaval  of  radicalism 
and  Indianism  which  was  to  begin  with  Carranza, 
in  1914.  Then  commenced  the  process  of  casting 
away,  bit  by  bit,  all  the  slow-built  civilization,  all 
the  shallow  foundations  of  commercial  prosperity, 
of  Diaz.  With  Carranza  began  the  upsurgence  of 
the  Indian,  the  terrific  push  upward  of  the  long- 
hidden  forces  of  destruction  which  had  been  held 
in  check,  not  only  for  the  thirty  years  of  the  Diaz 
peace,  but  for  all  the  four  centuries  since  the 
Spaniards  had  first  come  to  Mexico. 

Primarily,  this  destruction  was  marked  by  the 
wiping  out  of  the  fabric  of  the  promising  Mexican 
educational  system — for  Diaz  had  made  sound  be- 
ginnings toward  raising  the  Indians  out  of  the 
depths  of  their  ignorance.  His  rule  was  building 
a  foundation  for  business  and  for  progress  by 
creating  an  intelligence  which  would  demand  and 


THE  PEOPLE  WHO  BUY  57 

would  develop  the  better  things  which  white  civili- 
zation had  to  offer. 

Under  Carranza  the  ideal  was  not  of  slow  uplift 
by  education  and  the  creation  of  a  substantial 
economic  existence  which  would  make  life  and 
peace  worth  striving  for.  Carranza  and  those  who 
followed  him  under  the  banner  of  the  revolution 
have  thought  little  of  solid  progress.  Their  ideal 
has  been  revolution — the  political  remedy  for  the 
economic  ills  of  the  land. 

So,  despite  all  the  sweeping  promises  of  Car- 
ranza and  his  immediate  successors,  education  and 
the  progress  of  business,  of  trade  and  of  develop- 
ment have  gone  into  the  discard.  With  the  pres- 
sure of  the  needs  of  the  revolutionary  "generals" 
for  greater  and  greater  appropriations  for  their 
armies  (and  for  the  graft  which  ate  up  most  of 
such  appropriations),  with  the  ever- widening  cir- 
cle of  vampires  who  fattened  on  government  pat- 
ronage in  every  other  conceivable  way,  the  money 
available  for  education  as  well  as  for  industrial  ad- 
vancement shrank  steadily.  Where  under  Diaz 
the  total  annual  budget  of  the  government  was 
$50,000,000  a  year,  with  a  total  appropriation  for 
schools,  federal  and  state,  probably  less  than  $4,- 
000,000,  Carranza  had  nearer  $100,000,000  and 
spent  less  than  $2,000,000  a  year  on  education. 
For  Carranza,  when  the  demands  of  his  "gener- 
als" for  their  "share"  increased,  shut  off  the  fed- 


58  TRADING  WITH  MEXICO 

eral  support  of  the  schools  of  the  City  of  Mexico 
and  its  neighboring  villages,  and  also  the  sums 
which  in  other  days  had  gone  to  help  the  poorly 
provided  state  governments.  He  threw  the  school 
systems  on  the  hands  of  absolutely  bankrupt  cities 
and  towns,  with  the  result  that  in  the  City  of  Mex- 
ico alone  some  120  schools,  half  the  former  num- 
ber, were  closed,  and  25,000  children,  despite 
crowding  into  other  buildings,  were  deprived  of 
education.  All  this  is  history.  And  statistics  do 
not  show  that  there  has  been  any  recovery  since 
that  day. 

The  Obregon  government,  on  paper,  re-estab- 
lished tiio  federal  department  of  education  with  a 
cabinet  officer  at  its  head,  which  was  abolished  by 
Carranza  as  an  economy  measure.  There  was 
some  more  of  the  endless  Mexican  discussion  of 
systems  of  education,  but  so  far  as  can  be  found, 
no  increase  in  appropriations  or  in  plans  for  bet- 
ter support  of  the  public  schools.  All  those  wait, 
perhaps,  as  I  have  said,  on  the  improvement  of 
business  conditions,  as  the  final  solution  of  the 
business  problem  waits,  I  believe,  upon  them. 

But  they  all  wait  on  something  else,  which  I 
have  mentioned  above,  and  that  is  the  improved 
physical  condition  of  the  Mexican  people.  Com- 
fort, food  and  health  are  as  important  to  mental 
and  moral  development  as  the  training  of  the  mind 
by  education.  The  misery  of  Mexico  is  so  pro- 


THE  PEOPLE  WHO  BUY  59 

found,  her  crashing  inertia  so  deep-rooted  and  so 
self-perpetuating,  that  it  sometimes  seems  that 
she  can  never  be  cured  from  within  herself.  Some 
outside  force  must  break  the  circle  and  this  I  be- 
lieve is  the  great  opportunity  of  the  American  mis- 
sions, working  in  conjunction  with  the  great  civi- 
lizing energies  of  American  business. 

Already  something  has  been  done,  by  great 
American  business  concerns,  and  by  American 
trade  unions  along  the  northern  border  and  even 
within  Mexico  itself,  to  improve  living  conditions. 
But  the  terrific  chasm  of  the  Mexican  mass  re- 
mains utterly  unplumbed,  and  the  childhood  of 
Mexico  and  the  manhood  and  womanhood  of  Mex- 
ico wait,  hungry  because  their  food  does  not  feed 
them ;  in  discomfort  because  their  long  traditions 
do  not  let  them  even  desire  comfort;  in  sickness 
because  of  utter  ignorance  of  the  foundations  of 
human  health. 

Of  this  last  a  word  must  be  written  here.  I 
have  compiled,  elsewhere,1  the  astonishing  figures 
bearing  upon  this  question,  and  have  found,  in  the 
mass  of  Mexican  official  statistics,  that  the  death 
rate  of  Mexican  babies  under  one  year  is  nearly 
twice  that  of  the  United  States ;  between  birth  and 
ten  years,  three  times  that  of  this  country,  and  that 
clear  through  the  whole  range  of  Mexican  life, 

i  The  People  of  Mexico.  Mexioan  health  is  treated  directly  In 
the  chapter  on  "Vitality,"  pp.  86-109,  and  indirectly  in' the 
chapter  on  "Climate,"  pp.  131-151. 


60  TRADING  WITH  MEXICO 

from  two  to  four  times  as  many  Mexicans  die  in 
each  thousand  as  die  in  the  United  States  at  the 
same  ages.  The  average  life  of  every  Mexican 
born  is  but  15  years,  while  in  the  United  States  it 
is  about  35  years,  and  half  of  the  Mexicans  born 
this  year  will  be  dead  before  they  are  7  years  old, 
while  in  the  United  States  half  of  all  the  babies 
born  will  live  to  be  42  years  old. 

High  death  rate  means  sickness.  Experts  esti- 
mate that  for  each  death  in  the  United  States 
there  are  300  days  of  severe  illness  and  6,000  days 
of  indisposition  or  slight  illness,  spread  over  the 
average  35  years  of  American  life.  But  in  Mex- 
ico the  Average  age  of  death  is  15  years,  so  that 
the  days  of  sickness  must  be  crowded  into  less  than 
half  the  space  of  time  they  cover  in  the  United 
States. 

In  Mexico,  almost  no  care,  as  we  conceive  it,  is 
given  to  the  sick.  The  government  reports  show 
that  only  one-quarter  of  all  the  deaths  reported 
in  the  country  are  listed  as  "classified  by  the  doc- 
tor " — in  other  words,  there  is  no  medical  attend- 
ance at  all  in  three-quarters  of  all  the  fatal  ill- 
nesses in  Mexico.  It  is  well  known  to  those  who 
know  that  unhappy  land  that  in  the  case  of  illness, 
the  priest  and  the  doctor  are  sent  for  at  the  same 
time,  the  priest  to  administer  extreme  unction, 
the  doctor  to  do  what  he  can  with  a  dying  patient. 

This  factor  of  ill-health  in  Mexico  is  one  of  tba 


THE  PEOPLE  WHO  BUY  61 

most  terrible  of  all  the  pictures  of  her  misery, 
perhaps  the  most  potent  element  in  the  national 
ineptitude.  No  one  who  is  continually  ill  can  be 
greatly  interested  in  progress,  mental,  or  moral, 
or  industrial,  for  illness  is  the  greatest  force  work- 
ing against  the  material  advancement  of  the  peo- 
ple and  of  the  country.  And  upon  material  ad- 
vancement, upon  the  increase  of  income  and  the 
increase  of  needs  physical  and  cultural  (as  the 
money  comes  to  procure  them)  we  must  build  the 
solidity  of  the  Mexican  people  that  are  to  be,  as 
well  as  the  trade  which  we  seek  to  gain  from  them. 

Out  of  this  picture  of  darkness,  then,  comes  op- 
portunity and  with  opportunity  the  dawning  of  a 
new  day  in  Mexico.  Because  ill  health  is  so  great 
a  factor  as  it  is,  there  is  something  that  we  can  at- 
tack and  can  conquer.  Because  education  is  at 
the  low  ebb  that  it  is,  there  is  something  which 
we  can  do  that  is  direct  and  tangible,  when  the 
means  are  put  into  our  hands. 

There  is  hope  in  Mexico,  and  that  hope  is  tied 
up  with  the  opportunity  for  foreign  help,  which  is 
actually,  and  even  more  potentially,  the  most  dis- 
interested and  direct  force  working  on  conditions 
in  Mexico  to-day.  The  land  is  so  torn  by  personal 
politics,  so  nearly  ruined  by  the  exactions  of  un- 
thinking government,  so  much  the  football  of  well- 
deserved  calumny,  that  this  single  ray  of  clean, 
clear  light  can  be  recognized  by  all  as  one  of  the 


62  TRADING  WITH  MEXICO 

great  hopes  in  the  horizon  to-day.  That  hope 
must  be  made  to  dawn,  and  it  is  well  for  us  to  con- 
sider how  that  dawn  may  be  assured,  and  how  the 
day  which  must  follow  may  be  firmly  grounded  on 
economic  permanence,  on  social  stability  and  on 
the  comfort,  health,  education  and  industrial  prog- 
ress of  the  Mexican  people. 

This  is  the  field  wherein  I  believe  that  the  coop- 
eration of  the  American  companies  established  in 
Mexico  and  the  American  missions  operating  there 
will  bring  about  a  solution  of  the  ultimate  Mexican 
problem.  For  the  companies,  ready  and  anxious 
as  they  appear  to  be  to  serve,  would,  through  the 
missions,  find  a  means  wherein  their  money  and 
the  great  force  of  their  prestige  would  have  effi- 
cient direction.  The  foreign  oil,  mining  and  rail- 
way corporations  will  not  hesitate,  I  believe,  to 
place  their  resources  and  their  opportunities  at 
the  disposal  of  workers  whom  they  are  convinced 
can  truly  improve  the  morale  and  thus  the  pro- 
ductive capacity  of  the  workers  upon  whom  their 
business  depends.  Heretofore  there  has  been  mu- 
tual misunderstanding.  The  companies  have  not 
always  found  the  mission  workers  as  efficient  as 
they  would  like,  and  the  missionaries  have  been 
quite  ready  to  suspect  the  companies  of  repre- 
senting "predatory  capital' '  with  the  ambition, 
not  merely  of  making  their  business  profitable,  but 
of  putting  down  the  "  devoted "  leaders  of  the  peo- 


THE  PEOPLE  WHO  BUY  63 

pie  or  of  forcing  American  intervention  at  once. 

I  have  faith  in  both  the  companies  and  the  mis- 
sionaries, and  I  believe  that  in  the  new  political 
crisis  which  Mexico  is  bringing  upon  herself  as 
this  is  written  (and  which  she  may  have  tumbling 
about  her  ears  before  it  is  printed)  these  two  must 
reach  out,  and  will  reach  out,  to  clasp  hands  and 
go  on  together. 

Both  have  done  wonderful  things  for  Mexican 
education,  the  missions  through  the  conscious  de- 
velopment in  Mexico  of  the  ideal  of  education  for 
service,  and  to  the  end  of  raising  and  training 
leaders  for  the  Mexican  masses,  and  the  companies 
through  isolated  examples  of  truly  constructive 
welfare  and  educational  work. 

Probably  the  most  outstanding  example  of  the 
educational  achievements  of  American  corpora- 
tions was  that  of  the  trade  schools  which  were  or- 
ganized and  operated  by  the  National  Eailroad 
between  1890  and  1912,  under  the  direction  of 
E.  N.  Brown,  president  of  the  National  Railways 
— one  of  the  "pernicious  foreigners"  who  were 
exiled  under  Carranza's  "nationalization"  of  the 
railway  properties  in  1914.  These  railway  schools 
trained  between  15,000  and  18,000  Mexican  me- 
chanics and  engineers,  taking  boys  of  14  and  15, 
paying  them  first  62  cents  a  day  and  gradually  in- 
creasing that  until,  after  four  years'  training,  they 
were  receiving  three  and  a  half  pesos  a  day.  They 


64  TRADING  WITH  MEXICO 

TV  ere  then  ready  to  take  positions  as  skilled  work- 
ers in  the  railway  shops  or  on  the  locomotives  or, 
if  they  chose,  in  other  industries.  The  railway 
placed  no  limitation  on  them,  holding  that  the  com- 
pany benefited  in  the  increase  of  the  efficiency  of 
the  Mexican  worker  wherever  he  might  be. 

The  whole  scheme  of  this  work,  including  the 
paying  of  apprentices  while  learning,  was  the 
broadest  kind  of  educational  service,  taken  up,  to 
be  sure,  because  the  railway  company  needed  me- 
chanics and  trainmen,  but  with  an  effect  on  Mexico 
and  on  the  creation  of  the  so-called  Mexican  "  mid- 
dle class"  (the  buying  and  building  as  well  as 
the  elevating  element  in  any  population)  which  is 
still  felt  through  the  chaos  of  revolutionary  de- 
struction. 

To-day  the  greatest  industry  of  Mexico  is  the 
production  and  refining  of  petroleum,  and  foreign 
companies,  of  course,  control  it.  Much  genuinely 
helpful  welfare  work  is  being  done  by  them,  in- 
cluding not  only  schools  for  children  but  training 
schools  for  workers  as  well.  In  addition  the  very 
conscious  plan  of  increasing  wages  until  unskilled 
labor  now  receives  a  minimum  of  $2  a  day  is  hav- 
ing a  remarkable  effect  upon  the  standard  of  liv- 
ing and  upon  the  buying  capacity  (as  well  as  upon 
the  efficiency)  of  the  Mexicans  of  the  Tampico  oil 
section.  There  is  much  undigested  prosperity, 
and  agitators  are  creating  trouble  as  far  as  they 


THE  PEOPLE  WHO  BUY  65 

can  for  the  foreigners,  but  on  the  whole  the  effect 
on  the  material  well-being  of  the  peon  has  been 
advantageous.  It  is  inevitable  that  a  continuation 
of  this  attitude  should  bring  forth  a  vastly  in- 
creased civilization  at  least  in  this  one  section  of 
Mexico. 

Education  has  been  pushed  forward  by  the  com- 
panies, and  in  the  model  villages  such  as  the  town 
of  Terminal  (across  the  river  from  Tampico  on 
the  property  of  the  Doheny  companies)  really  ex- 
cellent schools  are  maintained  with  Mexican  teach- 
ers under  American  supervision. 

Conditions  in  the  oil  country  outside  the  private 
company  towns  are,  however,  deplorable,  present- 
ing a  contrast  which  is  not  without  its  mighty  les- 
son for  us  all.  The  graft  and  incompetence  of  the 
present  ruling  classes  of  Mexico  have  regarded  the 
prosperous  oil  towns  only  as  the  most  luxurious 
of  posts  for  influential  favorites.  The  educational 
conditions  of  Tampico,  where  in  a  city  of  more 
than  100,000  people  there  are  only  twenty  govern- 
ment primary  schools  with  an  attendance  of  4,500 
pupils,  beggars  description.  Yet  the  foreign  com- 
panies have  been  called  on  regularly  to  support  the 
Tampico  schools,  just  as  they  are  called  on  to  pay 
for  pavements,  sanitation,  etc.  And  this  money 
has  gone,  hardly  a  single  dollar  into  the  work  for 
which  it  was  collected,  but  countless  thousands 
into  the  bottomless  pit  of  revolutionary  graft. 


66  TRADING  WITH  MEXICO 

But  for  all  the  unfortunate  conditions  of  the 
moment,  the  possibilities  of  the  foreign  corpora- 
tions aiding  in  the  uplift  of  the  Mexican  mass 
throughout  the  country  is  one  of  the  encouraging 
phases  of  the  Mexican  trade  and  business  problem. 
It  links  up  definitely  with  the  solution  (on  which 
we  shall  touch,  in  later  chapters)  of  the  parts  of 
the  question  which  deal  with  other  elements  than 
the  human  equation.  The  beginning  which  has 
been  made  in  Tampico,  chiefly  by  the  great  Ameri- 
can companies,  carries  with  it  an  import  far 
greater  than  the  mere  contrast  between  their  trim 
little  company  villages  and  schools  and  the  ugly 
squalor  of  the  Mexican  towns.  Somehow,  out  of 
the  dark  present,  American  business  has  learned 
how  closely  it  is  linked  with  the  welfare  of  the  hu- 
man element  in  its  scheme.  They  have  learned  how 
the  simple  man,  how  his  happiness  and  prosperity, 
are  wrapped  up  with  the  prosperity  and  success  of 
every  enterprise  which  remotely  touches  him. 

Until  these  recent  years,  and  through  these 
American  corporations,  there  has  never  been  sci- 
entific welfare  work  in  Mexico,  there  has  never 
been  considerate  treatment  of  the  workers,  little 
study  of  their  weaknesses  and  their  needs.  If  we 
contemplate  that,  in  its  bare  truth,  we  can  begin 
to  understand  something  of  the  importance  of 
even  the  relatively  little  work  which  has  been  done 
of  late.  Perhaps  the  greatest  potentiality  of  the 


THE  PEOPLE  WHO  BUY  67 

future  of  the  human  side  of  the  Mexican  market 
lies  in  the  broad  extension  of  that  genuinely  Amer- 
ican attitude  toward  the  masses  of  the  country. 

I  have  advocated  the  union  of  the  forces  of 
American  missionaries  and  American  corpora- 
tions in  Mexico.  I  believe  that  this  will  bring 
great  good  and  will  eventually,  as  it  has  done  in 
this  country,  bring  a  higher  efficiency  of  labor  and 
a  larger  market  for  the  things  which  this  country 
can  export  to  Mexico.  The  desertion  of  the 
masses  by  the  revolutionary  government  and  the 
exile  of  the  natural  aristocracy,  have  brought  the 
human  problem  of  the  country  home  with  tremen- 
dous force  to  the  foreigners.  It  lies  to-day  almost 
solely  in  their  hands,  and  seems  likely  to  wait 
long  for  a  rescue  or  aid  from  any  other  source 
whatever. 

For  the  missionaries,  education  and  improved 
economic  conditions  amongst  the  workers  is  indis- 
pensable— they  are  the  tools  and  the  signs  of  their 
great  plan  of  regeneration.  For  business,  the  en- 
couragement of  religion  and  education  which  the 
mission  schools  give  promises  that  improvement  in 
the  laboring  population  and  in  the  buying  capacity 
of  that  population  which  is  demanded  by  the  ad- 
vancement of  their  business.  Somehow  that  buy- 
ing population  which  I  have  set  at  3,000,000  must 
be  increased.  Somehow  the  efficiency  of  the  la- 
boring group  (which  numbers  little  more  than  the 


68  TRADING  WITH  MEXICO 

buying  public)  must  be  increased.  Only  one  way 
is  open — to  make  the  masses  better  men,  happier 
men,  more  cultured  men.  The  ignorance  of  Mex- 
ico, the  inefficiency  which  results  from  that  igno- 
rance, the  low  standard  of  living  which  keeps  the 
people  from  those  "wants"  which  make  luxuries 
into  necessities  and  so  improve  trade  by  widen- 
ing the  eddies  of  demand — all  these  affect  us  all  in 
Mexico. 

Trade  follows  education.  It  follows  the  mis- 
sionaries of  business  and  of  religion.  It  thrives 
alone  on  the  prosperity  of  peoples.  To-day  these 
factors  of  trade  in  Mexico  are  only  depressants — 
in  the  future  they  must  and  surely  will  be  changed 
slowly  into  booming  creators  of  trade.  But  so 
long  as  the  chief  item  of  import  is  food  and  so  long 
as  the  productive  capacity  of  the  Mexicans  is  only 
half  developed,  so  long  will  the  market  in  Mexico 
swing  at  its  lowest  ebb. 


CHAPTER  IV 

THE  CREDIT  OF  MEXICO  AND  OF  THE  MEXICANS 

THE  Mexican  government  to-day  is  bankrupt, 
and  Mexican  business  is  bankrupt.  The  most  san- 
guine propagandists  of  the  revolutionary  govern- 
ments can  offer  nothing  better  than  promises  to 
offset  the  obvious  facts  of  Mexican  finance.  The 
government  to-day  owes  nearly  a  billion  dollars — 
including  unpaid  interest  on  her  debts  for  eleven 
years.  Commercial  credit  has  reflected  the 
ghastly  vision  of  government  bankruptcy,  because 
the  ingrained  principle  of  Mexican  politics  has 
been  the  subservience  of  economic  progress  to  po- 
litical exigencies. 

The  history  of  Mexican  revolutionary  govern- 
ment has  been  marked  by  the  steady  suction  of 
business  into  the  maelstrom  of  political  horror. 
This  began  in  the  earliest  years  of  the  rule  of  Car- 
ranza  (1914-1920).  For  five  years  Carranza  car- 
ried on  a  deliberate  campaign  to  destroy  the 
banks,  as  the  representatives  of  the  capitalists. 
He  succeeded,  despite  all  the  magnificent  resil- 
iency of  business.  He  swamped  the  country  with 
paper  currency ;  he  withdrew  the  metallic  reserves 
of  the  banks  until  their  bank  notes  reached  almost 

69 


70  TRADING  WITH  MEXICO 

the  degradation  of  his  own  issues.  He  made  Mex- 
ico into  a  land  of  thieves,  and  gave  their  thievery 
the  cloak  of  government  sanction — as  of  one  thief 
underwriting  the  ventures  of  another. 

When  her  banks  were  gone,  Mexico  had  nothing 
left  but  her  mines  and  her  oil,  for  Mexico  creates 
virtually  no  wealth.  She  manufactures  nothing 
and  exports  nothing  save  the  ultimately  exhausti- 
ble resources  of  her  soil.  Mining  flourished  dur- 
ing the  war,  with  allied  governments  supporting 
the  lead  and  silver  markets,  and  oil  has  flowed  on 
and  continues  to  flow,  giving  Mexico  herself  only 
the  curs«  of  incalculable  unearned  wealth  for  the 
personal  loot  of  her  government  officials. 

Credit  wan  Mexico's  great  asset  under  Diaz — 
he  spent  years  in  establishing  it  and  upon  it  he 
built  the  nation.  To-day  in  Mexico  there  is  no 
credit.  There  is  gold  in  circulation  and  the  sight 
of  gold  is  encouraging  to  the  business  man.  But 
the  gold  in  Mexico  circulates  because  there  is  no 
credit ;  no  man  trusts  another  and  none  trusts  the 
promises  of  the  government.  Mexico  cannot  to- 
day issue  paper  money,  and  her  heavily  alloyed 
silver  coin  is  on  a  par  with  her  gold  only  because 
an  artificial  scarcity  is  maintained  in  order  to 
increase  the  value  of  silver  as  the  change  needed 
in  business. 

Mexico  is  one  of  the  great  potential  markets  of 
the  world.  The  American  manufacturer  can  justly 


THE  CREDIT  OF  THE  MEXICANS       71 

look  to  it  for  an  outlet  for  his  wares.  But  a 
market  is  useless  until  the  buyer  can  pay  for  his 
goods.  Mexico  is  not  yet  a  place  to  dispose  of 
what  we  make  until  she  can  pay  for  what  she 
takes.  The  credit  situation  is  the  crux  of  Mexico, 
and  the  crux  of  the  credit  situation  is  the  political 
chauvinism  which,  eight  years  ago,  set  out  delib- 
erately to  destroy  that  credit,  because  credit  was 
capitalism  and  capitalism  was  unfriendly  to  the 
self-appointed  leaders  of  the  proletariat  and,  more 
important  still,  was  said  to  be  the  enemy  of  that 
world  radical  movement  to  which  the  Mexican 
revolutionary  leaders  look  so  smugly  to  save  them 
from  interference  in  their  orgy  of  loot  and  glory. 

When  Diaz  left  the  presidency  in  1911,  there 
were  $35,000,000  in  the  national  treasury,  and 
Mexico's  credit  was  such  that  she  could  float  at 
par  a  national  bond  issue  drawing  4%  per  cent. 
To-day  the  unpaid  interest  on  her  public  obliga- 
tions exceeds  $150,000,000  and  she  cannot  at  any 
price  borrow  a  cent  on  any  security  less  than  the 
indorsement  of  the  government  of  the  United 
States  of  America. 

This  is  the  way  the  situation  is  expressed  in 
cold  figures.  But  Mexico  is  a  land  of  infinite  re- 
source, both  natural  and  diplomatic,  and  nations 
in  worse  condition  than  this  have  been  taken  in 
hand  by  great  bankers  and  placed  upon  their 
financial  feet.  Any  Mexican  official  can  explain 


72  TRADING  WITH  MEXICO 

Mexico's  condition  convincingly — the  long  years 
of  revolution,  the  paralyzation  of  industry 
through  destruction  and  through  the  prices  and 
want  brought  to  all  the  world  by  the  Great  War. 
It  is  therefore  of  no  really  deep  significance,  they 
say,  that  Mexico  owes  millions  of  dollars,  and  that 
she  is  to-day  suing  for  favor  in  the  world's  money 
markets.  But  there  is  a  deep  and  fundamental 
cause  which  is  back  of  her  financial  bankruptcy, 
back  even  of  its  merely  economic  causes  in  wrecked 
mines  and  abandoned  factories,  in  ranches 
stripped  of  millions  of  head  of  cattle  which  bandits 
have  killed  for  their  hides. 

The  real  bankruptcy  of  Mexico  goes  deep  down 
into  the  minds  of  men,  Mexicans  and  foreigners, 
government  officials  and  rabid  interventionists 
alike.  The  bankruptcy  of  Mexico  is  a  sickness 
born  of  broken  faith,  a  moral  bankruptcy  that  is 
ugly  with  human  greed  and  hopeless  with  nervous 
fear. 

The  trouble  with  Mexico  to-day  is  that  Mexicans 
as  well  as  foreigners  have  ceased  to  believe  in 
Mexico. 

At  the  time  of  my  several  recent  visits  to 
Mexico,  I  did  not  go  as  a  stranger  to  the  country. 
I  had  watched  her  develop  during  six  years  prior 
to  1910,  under  the  peace  and  prosperity  of  the 
Diaz  regime.  Understanding  something  of  the  na- 
tive psychology  and  much  of  that  of  the  foreigners, 


THE  CREDIT  OF  THE  MEXICANS       73 

I  was  prepared  to  find  that  a  good  deal  of  the 
seriousness  of  the  situation  was  due  to  panicky 
fear  and  distrust  one  of  another.  What  I  was  not 
prepared  for  was  a  condition  where  every  inci- 
dent, every  situation,  every  tight-strung  nerve  of 
potential  strength  or  weakness  led  down  pell-mell 
paths  to  a  deep  ravine  of  utterly  blasted  faith  not 
only  in  present  conditions  in  Mexico,  but  in  the 
possibility  of  the  country's  ever  crawling  back  to 
her  old  serenity  and  strength  in  any  measurable 
time. 

Mexico,  as  most  Americans  do  not  realize,  con- 
siders herself  to  have  been  at  peace  for  the  past 
five  years,  for  the  bandits  were  in  the  hills  and 
most  "  revolutionary "  outbreaks  were  being  suc- 
cessfully nipped.  Yet  in  the  important  city  of 
Monterey,  typical  of  the  interior  of  Mexico,  the 
damage  done  "in  the  revolution "  remains  un- 
touched. On  the  main  plaza  the  stones  that  are 
left  of  the  beautiful  old  Casino,  burned  by  Car- 
ranza's  soldiers  six  years  ago,  have  barely  been 
moved  from  the  roadway.  Smoke-stained  shells 
of  buildings  rise  here  and  there,  and  in  the  suburbs 
bullet-ridden  windows  still  remain  in  fine  private 
houses  and  factories.  The  once  paved  streets  are 
full  of  unexpected  bumps,  the  roads  leading  to  the 
smelters  and  out  into  the  country  are  cut  deep 
with  ruts  and  puddles  and  railway  crossings  are 
all  but  impassable,  even  to  skipping  Fords.  The 


74  TRADING  WITH  MEXICO 

street  cars  limp  and  bump  and  leak,  and  the  very 
civic  improvements  seem  installed  with  a  fatalistic 
certainty  that  they  will  soon  be  destroyed. 

There  is  industry  and  there  is  business  in 
Monterey,  each  of  a  kind.  In  the  old  days  there 
were  two  great  smelters,  foreign  owned,  a  steel 
plant  and  a  brewery,  besides  three  railway  shops 
and  miscellaneous  other  factories.  Most  of  the 
miscellaneous  factories  closed  long  ago,  but  the 
smelters  and  the  steel  plant  kept  going  in  good 
order— as  long  as  war  prices  sustained  them. 
Now,  one  of  the  smelters  has  closed,  for  London 
has  ceased  holding  up  the  lead  market,  and  the 
other  (owned  by  the  American  Smelting  and  Ee- 
fining  Company)  continues  only  because  it  uses 
the  ore  from  its  own  mines.  During  the  war  the 
steel  plant  was  handled  by  the  United  States  War 
Trade  Board,  the  great  organization  which  har- 
nessed our  own  industries  to  war  needs,  and  80 
per  cent  of  its  product  was,  by  agreement,  sold 
in  the  United  States  and  in  Cuba — at  war  prices. 
When  the  war  ended,  the  Monterey  steel  plant 
was  forced  to  curtail,  and  to-day  the  great  blast 
furnace  is  cold  and  only  a  Mexican  government 
order  for  a  few  thousand  tons  of  steel  rails  keeps 
the  rolling  mill  moving. 

The  railway  shops  are  content  with  the  most 
perfunctory  of  repairs,  and  are  more  remarkable 
for  the  appalling  array  of  rusted  and  rotted  en- 


THE  CREDIT  OF  THE  MEXICANS      75 

gines  (I  have  counted  150  engines  out  of  commis- 
sion in  the  Monterey  yards)  and  for  the  wrecks 
of  burned  freight  cars  which  fill  their  sidings  than 
for  any  activity  which  inspires  their  machinery. 

The  few  factories  which  operate  are  sustained, 
in  their  turn,  by  the  high  prices  which  even  the 
staples  of  existence  command  in  Mexico.  Three 
small  cotton  goods  factories,  reopened  five  years 
ago,  get  prices  only  a  few  cents  below  those  paid 
for  imported  goods,  to  whose  cost  in  this  country 
is  added  a  heavy  import  duty.  The  brewery  keeps 
running,  although  it  pays  the  government  a  tax! 
of  100  per  cent  on  its  product — estimated  to  be 
$1,000  in  American  gold  per  day. 

Retail  trade  goes  on,  throughout  Mexico,  but  the 
sales  are  greatly  curtailed  and  the  prices  are  out 
of  reach  of  the  masses,  being  twice  to  five  times 
those  of  the  last  normal  period,  1912.  Stocks  are 
hopelessly  depleted,  for  no  merchant  will  keep  a 
large  supply  of  goods  on  hand,  for  fear  not  alone 
of  the  long-promised  drop  in  the  world  market,  but 
of  what  will  happen  in  Mexico  to-day  or  to-morrow 
or  next  week. 

Moreover,  all  business  is  on  an  absolutely  cash 
basis,  and  for  "hard"  money — gold  and  silver- 
alone,  whether  the  trade  be  wholesale  or  retail. 
In  Mexico  to-day  credit  is  practically  unknown, 
either  amongst  Mexicans  or  between  Mexican 
houses  and  those  with  whom  they  deal  abroad. 


76  TRADING  WITH  MEXICO 

There  is  a  stringency  of  currency,  due  to  the  de- 
struction (for  various  reasons  soon  to  be  noted) 
of  all  forms  of  paper  money.  Mexico  is  spending 
literally  her  economic  life  blood,  gold  and  silver, 
and  her  great  resources  are  wasting  and  rotting 
because  there  is  no  money  with  which  to  develop 
them  or  to  move  them. 

Those  are  simple  conditions,  patent  to  any  ob- 
server who  stays  longer  than  the  few  hours  or  a 
day  allowed  the  busy  junketer  on  his  trip  through 
"  prosperous  Mexico. "  Back  of  these  conditions, 
however,  are  facts  which  are  as  incontrovertible 
and  menacing.  The  closing  of  the  smelters  has 
back  of  it  the  conditions  of  mining,  in  a  country 
which  for  centuries  has  depended  on  its  mines  for 
its  existence  as  an  economic  entity.  Even  through 
the  war,  with  war  prices  for  metals,  the  mines 
which  were  producing  were  only  those  with  high 
grade  ores,  which  could  bear  the  risks  of  banditry, 
the  cost  of  ponderous  freight  rates,  or  could  main- 
tain their  private  railway  trains  to  transport  ore 
which  the  run-down  government  rolling  stock 
could  not  handle.  Moreover,  even  war  time  prices 
did  not  make  possible  the  proper  development  of 
the  properties,  and  when  the  bottom  dropped  out 
of  the  lead  and  copper  markets,  many  of  the  richest 
mines  closed,  because  they  had  not  been  able  or 
had  not  dared  do  enough  normal  development  to 
keep  ahead  of  the  work  on  the  rich  veins. 


THE  CREDIT  OF  THE  MEXICANS       77 

Back  of  the  hand-to-mouth  operation  of  fac- 
tories and  wholesale  and  retail  stores  is  the  situa- 
tion with  regard  to  currency  and  banking.  Money 
in  Mexico  is  worth,  at  legal  interest,  1  per  cent 
per  month  (12  per  cent  per  year)  but  if  you  have 
money,  and  will  take  a  chance,  you  can  get  5  per 
cent  a  month  and  even  more  on  as  good  security 
as  the  country  affords.  So  few  are  the  men  who 
believe  enough  in  Mexico  to  take  the  chance  that 
there  is  not  enough  capital  even  to  satisfy  the 
needs  of  speculators.  And  can  legitimate  business 
expand  or  even  carry  its  normal  load  when  the 
money  it  ought  to  borrow,  the  money  it  has  al- 
ready invested,  is  worth  so  much  as  that?  The 
only  form  of  business  which  thrives  in  Mexico  is 
speculation,  and  I  think  I  am  safe  in  saying  that 
virtually  every  sign  of  business  activity  which 
any  visitor  to  Mexico  sees  to-day  is  speculative  at 
its  source  or  dependent  upon  speculation. 

This  speculation  finds  its  chief  manifestation 
in  the  marketing  of  food — the  distribution  of  the 
necessities  of  life  is  in  Mexico,  as  elsewhere,  the 
source  of  sure  profit.  But  in  Mexico,  so  great  is 
the  fear  of  men  of  what  may  happen,  that  the 
profits  of  speculation  transcend  anything  known 
to  our  busiest  food  profiteers.  The  farmers  will 
not  take  the  chances  (which  include  the  uncertain- 
ties of  costly  graft)  incident  to  getting  freight 
cars  or  pack  animals  as  well  as  the  fear  of  bandits. 


78  TRADING  WITH  MEXICO 

This  allows  the  speculators,  in  quick  turnovers,  to 
make  as  much  as  200  per  cent  on  a  car  of  corn  in  a 
fortnight,  and  this  condition  has  lasted  for  nearly 
eight  years. 

Another  phase  of  speculative  activity  is  in  the 
importation  of  foreign  goods.  The  Mexican 
customs  laws  are  complicated  with  elaborate 
classifications,  and  at  best  it  is  something 
of  a  speculation  for  a  merchant  to  import 
goods  in  the  days  of  sudden  changes  in  classifi- 
cations and  boosts  of  tariffs  without  notice.  In 
addition,  however,  many  favored  henchmen  of 
government  officials  have  been  given  concessions 
to  import  all  goods  free,  privileges  which  it  is 
said  they  sell  to  any  one  who  will  take  the  risk  for 
a  fixed  charge  of  one-half  of  the  customs  fee  .that 
would  otherwise  have  been  collected.  Now  and 
then  these  favored  persons  take  a  flyer  of  their 
own  and  one  of  them  once  sent  in  a  carload  of 
shoes,  most  of  which  were  dumped  in  Monterey. 
Having  paid  no  duty,  the  shoes  were  sold  at  prices 
which  demoralized  the  local  market,  for  the  nor- 
mal duty  on  a  pair  of  shoes  averages  $1.50. 

Other  things  "happen."  For  instance,  a  fav- 
ored group  gets  a  trainload  of  goods — say  food- 
stuffs— at  an  entry  port.  Then  the  government 
suddenly  announces  that,  effective  at  once,  the 
high  duties  on  these  foodstuffs  are  to  be  removed. 
The  goods  of  those  "in  the  know"  go  across  duty 


THE  CREDIT  OF  THE  MEXICANS       79 

free,  and  if  other  merchants  telegraph  orders  to 
take  advantage  of  the  open  port,  as  like  as  not 
they  find,  when  the  goods  reach  the  border,  that 
the  high  duties  have  been  put  back  as  suddenly  as 
they  were  removed. 

Such  things  as  these  happened  with  great  fre- 
quency in  the  days  of  Carranza.  Perhaps  they  are 
not  happening  now,  for  Mexico  is  on  her  good  be- 
havior. But  all  this  has  occurred  frequently 
enough  to  have  shaken  the  faith  of  simple  men. 
The  fear  of  what  may  happen  to-morrow — things 
of  this  sort  or  something  else — stifles  business, 
for  business  is  a  timid  spirit,  and  does  not  re- 
cover its  confidence  quickly. 

I  hold  no  brief  against  the  present  governments 
of  Mexico.  They  have  been  and  still  are  revolu- 
tionary governments.  They  have  a  natural  faith 
in  their  own  vital  importance  to  Mexico,  and  con- 
sider that  whatever  it  may  have  cost  the  country 
to  get  such  government  is  money  well  spent.  But 
for  her  own  sake  and  for  the  sake  of  those  of  us 
who  are  sincerely  interested  in  knowing  what 
troubles  Mexico,  it  seems  that  we  should  realize 
l>y  this  frank  analysis  the  lack  of  faith  which  I 
describe. 

The  situation  which  I  have  just  outlined  is  eco- 
nomic, but  back  of  the  economic  and  basically 
more  important  is  the  financial  situation.  The 
cause  of  the  economic  bankruptcy  is  to  be  found 


80  TRADING  WITH  MEXICO 

in  the  new  conception  of  the  financial  organization 
of  Mexico  which  the  Carranza  officials  have  pro- 
nounced, and  upon  which  Mexico  has  been  acting 
for  the  past  seven  years. 

Let  us  look  for  a  moment  at  the  financial  side  of 
the  foreign  investments  in  Mexico,  for  recent  ac- 
tivities on  the  part  of  the  government  seem  to 
admit  that  Mexico  recognizes  that  an  important 
factor  in  the  present  national  bankruptcy  is  the 
loss  of  foreign  capital.  This  damming  up  of  the 
flow  of  foreign  investments  has  been  the  result  of 
two  distinct  situations.  First  is  the  outrages,  the 
wanton  destruction  of  foreign  property  and 
foreign  lives  by  bandits  and  revolutionaries.  The 
other  is  the  enactment  and  partial  enforcement  of 
drastic  anti-foreign  laws. 

One  of  the  strongest  pillars  of  the  material 
prosperity  of  the  Diaz  time  was  foreign  invest- 
ments. The  bonanza  mines  had  to  become  paying- 
low-grade  business  propositions  in  order  to  pre- 
serve mining  as  a  national  asset.  The  barren  ag- 
ricultural lands  had  to  be  irrigated,  with  water 
that  fell  in  mountains  hundreds  of  miles  away. 
More  than  that,  Mexico  had  to  begin  to  build  an 
industrial  machine  of  railroads  and  factories 
which  would  create  new  national  wealth — the  econ- 
omists of  even  a  generation  ago  realized  that  no 
land,  however  rich,  could  prosper  from  her  natural 


THE  CREDIT  OF  THE  MEXICANS       81 

resources  alone.  These  were  the  axiomatic  bases 
of  the  economic  need  of  foreign  money. 

The  financial  need  for  foreign  capital  was  yet 
more  pressing.  At  the  beginning  of  the  Diaz  rule, 
the  trade  balance  against  Mexico  was  apparently 
insurmountable,  and  although  year  by  year  it  was 
cut  down  through  the  economic  development  of  the 
country,  each  year  the  trade  balance  has  to  be 
evened  up.  This  was  the  function  of  foreign  in- 
vestments, and  this  was  the  financial  reason  for  its 
continued  encouragement  under  Diaz.  To  the  last 
year  of  his  reign,  this  inflow  of  foreign  money  kept 
coming  evenly,  in  tens  and  twenties  of  millions  an- 
nually. As  it  came  in,  balancing  the  outgo  of  in- 
terest on  the  national  debt  and  on  private  loans,  it 
became  itself  a  producer  of  Mexican  wealth,  so 
that  in  time  it  would  have  eliminated  the  necessity 
of  further  forced-draft  encouragement  for  outside 
investment. 

That  time  had  not  come  in  1911,  however,  when 
Diaz  left  Mexico.  But  the  net  result  of  the  stop- 
page of  foreign  investment  in  the  revolutionary 
period  which  followed  is  to  be  found  to-day  in  that 
unpaid  interest  of  nearly  $200,000,000  on  govern- 
ment securities  alone. 

This  is  no  apology  for  the  mistakes  of  the  Diaz 
regime.  The  great  men  of  that  day  built  a  vast 
commercial  enterprise,  the  Business  of  Being  tke 


82  TRADING  WITH  MEXICO 

Bepublic  of  Mexico,  but  like  many  commercial  en- 
terprises of  the  period  before  the  Great  War,  it 
had  left  out  the  human  equation.  It  was  this 
failure  which  wrecked  the  Diaz  government  in  the 
end,  and  made  such  purely  paternalistic  regimes 
virtually  impossible  in  Mexico  again. 

To-day  the  rulers  of  Mexico,  awake  at  last  to  the 
need  for  the  foreign  money  which  their  revolution- 
ary predecessors  shut  out  so  stubbornly  under 
the  "  Mexico  for  the  Mexicans "  policy  and  the 
socialistic  constitution,  have  been  carrying  on  an 
active  campaign  of  publicity  and  official  concilia- 
tion. The  junkets  of  Chambers  of  Commerce 
from  al1  over  the  United  States  are  part  of  the 
big  plan.  Yet  in  the  hearts  of  the  people,  of  this 
country  and  of  Europe,  who  hold  the  purse  strings, 
be  they  bankers  or  enthusiastic  investors  of  little 
capital,  there  lingers  and  will  linger  many  doubts. 
It  seems  likely  to  be  a  long  day  before  the  foreign 
investor  finds  any  new  faith  in  Mexico. 

But  what  of  Mexico  herself?  Where  lie  the 
financial  roots  of  her  lost  faith  in  Mexico's  own 
future?  After  the  economic  conditions  noted 
above,  they  lie  in  the  Mexican  currency  situation. 

To-day  Mexico  has  no  currency  but  gold,  silver, 
nickel  and  copper  coins.  There  are  no  bank  bills, 
there  is  no  bankable  paper,  there  are  no  promis- 
sory notes,  no  checks,  no  credit.  Seven  years  ago 
there  was  no  metallic  currency  whatever,  only 


;    THE  CREDIT  OF  THE  MEXICANS      83 

banknotes,  depreciated  till  a  peso  (normally  worth 
fifty  cents)  would  hardly  pay  carfare.  During 
that  time  the  banking  business  was  all  but  wiped 
out,  and  bankable  paper  disappeared. 

Yet  back  of  that  period,  in  turn,  was  the  time  of 
Diaz,  when  paper  money  was  as  good  as  gold,  and 
the  ordinary  processes  of  exchange  went  on  as  in 
any  civilized  country.  Diaz  had  found,  when  he 
came  to  power,  a  condition  similar  to  that  which 
exists  to-day,  with  only  metallic  currency  in  cir- 
culation. He  brought  in  a  new  financial  regime, 
establishing  sound  banks,  which  under  govern- 
ment control  issued  paper  money.  In  1910,  the 
circulating  medium  of  the  country  was  $150,000,- 
000,  of  which  $65,000,000  was  banknotes,  accepted 
on  an  absolute  parity  with  the  $85,000,000  of  gold 
and  silver.  This  money  was,  as  noted,  supple- 
mented by  active  bankable  paper  circulating 
freely  in  business.  To-day,  by  contrast,  the  gov- 
ernment admits  that  there  is  less  than  $50,000,000 
(I  personally  think  it  is  very  much  less)  of  gold 
and  silver  money  in  the  country — to  transact  the 
business  (on  a  cash  basis)  of  nearly  15,000,000 
people ! 

The  loss  of  $100,000,000  of  the  circulating  me- 
dium of  the  country  (to  make  no  estimate  of  the 
loss  and  inconvenience  due  to  the  destruction  of 
credit)  is  the  work  of  the  revolutions  of  the  past 
eleven  years. 


84  TRADING  WITH  MEXICO 

It  was  Carranza  who  started  the  paper  money 
orgy.  In  the  course  of  three  years  he  issued  prob- 
ably 2,000,000,000  pesos  of  paper  currency— the 
exact  records,  if  kept,  have  never  been  made  pub- 
lic. Through  this  means  he  destroyed  the  confi- 
dence of  the  public  in  paper  money,  and  ulti- 
mately, when  he  came  to  full  power,  wiped  out  of 
existence  the  whole  system  of  Banks  of  Issue  es- 
tablished by  Diaz. 

The  first  of  the  Carranza  paper  money  was  is- 
sued in  Chihuahua,  and  was  accepted  at  its  face 
value.  Diaz  had  taught  the  people,  down  to  the 
humblest  peon,  to  accept  paper  money,  and  the 
bayonets  of  the  Carranza  troops  convinced  any 
who  doubted  the  quality  of  the  new  issue.  It  was 
a  good  scheme  for  financing  a  revolution — till 
Villa  drove  Carranza  out  of  Chihuahua  and  de- 
clared Carranza  money  worthless  and  its  posses- 
sion a  political  crime.  Now  Villa  money  was 
issued,  and  was  forced  upon  the  people  at  the 
points  of  new  bayonets,  and  as  the  various  chief- 
tains chased  each  other  over  the  country  the 
money  of  the  towns  fluctuated  with  the  identity  of 
the  conqueror.  Metallic  currency  disappeared 
completely  and  the  value  of  paper  money  fell  by 
jolts  to  a  few  centavos  on  the  peso. 

These  were  the  days  when  men  who  were  paid 
in  American  money  lived  like  kings.  House  rent 
was  fifty  cents  a  month ;  light,  gas  and  water  cost 


THE  CREDIT  OF  THE  MEXICANS       85 

a  dime.  You  could  travel  hundreds  of  miles  in  a 
Pullman  for  a  dollar,  and  settle  all  your  old  debts 
for  two  per  cent  of  the  original  figure.  Food 
prices  went  up,  of  course,  and  the  natives,  mostly 
paid  in  the  depreciated  paper,  suffered  terribly. 
Starvation  followed  in  waves,  and  the  mortality 
in  the  cities  was  appalling. 

The  value  of  paper  money  fluctuated  over  night, 
and  after  closing  hours  each  day,  there  was  a 
scampering  of  merchants  to  sell  the  currency 
taken  in  during  the  day.  They  bought  New  York 
drafts,  worn  American  bills,  diamonds,  carriages 
and  real  estate,  at  prices  whose  rise  could  not  pos- 
sibly keep  up  with  the  fall  in  the  value  of  paper 
money. 

Early  in  the  excitement  Carranza  had  begun  to 
repudiate  his  various  issues  of  currency.  The 
reason  given  was  a  real  one — that  they  were  being 
counterfeited  everywhere,  a  process  simple 
enough,  for  the  original  issues  were  themselves 
crudely  printed  on  ordinary  paper.  At  first  the 
Carrancistas  had  attempted  to  keep  up  with  the 
avalanche  of  counterfeits  by  requiring  that  all 
paper  money  on  hand  in  banks,  stores  and  private 
tills  be  submitted  regularly  for  inspection.  Not 
even  the  government  "experts"  could  tell  the  bad 
from  the  good,  however,  and  they  ended  by  de- 
claring all  of  the  money  submitted  by  their  politi- 
cal friends  to  be  all  right,  and  confiscating,  as 


86  TBADING  WITH  MEXICO 

counterfeit,  a  large  and  fixed  percentage  of  that 
owned  by  men  of  doubtful  "loyalty."  The  pro- 
cess did  not  tend  to  increase  the  public  confidence 
in  the  administration. 

The  final  issues  of  Carranza  revolutionary 
paper  money  came  from  Vera  Cruz  in  1915.  This 
money  alone  was  recognized  as  a  part  of  the  Car- 
ranza government  obligation,  and  $8,000,000  was 
set  aside  in  the  Carranza  financial  plans  for  its 
redemption.  This  last  paper  money,  issued  after 
Carranza  was  recognized  by  the  United  States, 
consisted  of  engraved  notes,  known  as  "infalsifi- 
cables"  or  "uncounterfeitables."  These  were 
issued  at  10  centavos  on  the  peso,  and  the  gov- 
ernment was  pledged  to  "redeem"  them.  This  is 
being  done,  but  not  by  anything  so  simple  as  pay- 
ing honest  money  for  them  (which  would  put 
them,  perhaps,  into  general  circulation).  Instead, 
all  who  pay  direct  taxes  are  required  to  return  a 
surtax  of  the  face  value  of  their  taxes  in  these 
"infalsificables."  A  friend  of  Carranza  wrote 
that  "this  was  a  beautifully  simple  and  ingenious 
scheme."  It  is  that  still,  for  those  favored  ones 
who  control  the  remaining  supply  of  the  notes  and 
sell  them  at  advanced  prices  to  the  taxpayers  who 
have  to  have  them — mostly  the  big  foreign  mining 
and  oil  companies. 

The  story  of  the  paper  money  days  in  Mexico, 
and  the  fact  that  of  the  billions  issued  but  $8,000,- 


THE  CREDIT  OP  THE  MEXICANS       87 

000  is  recognized  as  a  just  debt,  may  stir  the  indig- 
nation, and  it  certainly  clarifies  our  understanding 
of  Mexico 's  lost  faith  in  her  rulers.  But  in  point 
of  actual  fact,  the  destruction  of  the  banking  and 
credit  system  of  the  country,  which  was  a  corol- 
lary of  the  paper  money  orgy,  was  far  more  terri- 
ble and  cast  an  even  more  lasting  blight  on  the 
standing  of  the  government. 

Early  in  his  revolutionary  career  Carranza  was 
at  odds  with  the  banks.  He  considered  it  an  un- 
friendly act,  one  "taking  advantage  of  the  unlet- 
tered," for  the  banks  to  use  their  knowledge  of 
financial  conditions  to  profit  from  the  fluctuations 
of  his  paper  currency.  He  also  found  the  banks 
"  reactionary "  in  their  refusal  to  use  their  stand- 
ing to  assist  him  in  making  his  money  popular, 
and  he  charged  openly  that  the  banks  had  "  com- 
bined to  discredit  the  government. ' '  On  his  entry 
into  Mexico  City  he  endeavored  to  coerce  banking 
officials  personally,  and  jail  was  sometimes  the 
boarding  place  of  bank  managers  and  bank  presi- 
dents, when  they  refused  to  unlock  the  vaults  to 
government  ' l  inspection. ' ' 

The  wrecking  of  the  banking  system  extended 
over  more  than  a  year.  Huerta,  who  preceded 
Carranza  in  the  presidency,  took  the  first  forced 
loans  of  $5,000,000  from  the  banks,  allowing  them 
to  issue  new  paper  currency  to  cover  this  coin 
taken  out.  Carranza,  on  gaining  control  of  Mexico 


88  TRADING  WITH  MEXICO 

City,  found  the  forced  loan  idea  convenient,  for 
he  was  in  sore  financial  straits.  As  one  chronicler 
has  it,  "  Money  had  to  be  found  .  .  .  The  money 
in  the  banks  was  the  only  money  available,  and  it 
was  taken  as  the  only  way  out  of  a  very  difficult 
situation. ' ' x  In  its  statement  of  debts,  however, 
the  Carranza  government  recognized  these  forced 
loans  to  a  total  of  $20,000,000,  none  of  which  has 
been  paid  in  six  years. 

The  Carranza  "loans"  from  the  banks  inevita- 
bly shook  their  credit  and  with  it  the  credit  of 
every  business  man  and  business  organization, 
and  inevitably  the  credit  of  the  Mexican  govern- 
ment itself.  Banknotes  dropped  in  value  and  al- 
though they  never  reached  the  low  mark  touched 
by  government  paper,  their  fall  to  75,  to  50  and 
finally  30  per  cent  of  their  face  value  reduced  in 
like  manner  the  value  of  all  bank  deposits,  and 
finally  brought  banking  transactions  to  a  stand- 
still. The  process  of  final  destruction  of  the  banks 
began  with  the  edict  of  September  26,  1915,  abol- 
ishing out  of  hand  the  Huerta  concession  which 
had  allowed  some  of  the  banks  to  issue  additional 
paper  currency  to  cover  the  Huerta  "loans."  The 
banks  were  required  to  bring  their  reserves  up  to 
the  old  basis  in  forty-five  days,  and  despite  the 
blow  to  their  credit,  this  was  accomplished.  On 
November  10,  however,  another  Carranza  edict 

i  E.  D.  Trowbridge.    Mexico  Today  and  Tomorrow,  p.  198. 


THE  CREDIT  OF  THE  MEXICANS      89 

reduced  the  recognized  bank  reserves  by  requiring 
that  silver  coins  be  estimated  at  their  bullion,  in- 
stead of  their  face  value.  This  storm  was  weath- 
ered, in  its  turn,  and  nothing  further  was  done  for 
nearly  a  year,  although  during  that  time  the 
breach  between  Carranza  and  the  banks  was  con- 
tinually widening. 

An  edict  of  September  15,  1916,  required  that 
the  banks  should  have  in  their  vaults  within  sixty 
days  enough  gold  and  silver  to  redeem  at  par  every 
banknote  which  they  had  in  circulation,  currency 
which  had  been  issued  under  concessions  allowing 
a  banknote  circulation  twice  the  total  of  the  bank 
reserves  in  metal  and  bankable  paper.  The  de- 
cree also  prohibited  the  banks  from  doing  business 
with  the  public  until  the  conditions  set  down  were 
fulfilled.  In  other  words,  liquidation  of  notes  and 
deposits  was  stopped,  and  the  life  blood  of  bank- 
ing, the  active  turning  over  of  funds  in  the  course 
of  business,  was  cut  off.  Finally,  on  December  14, 
1916,  the  coup  de  grace  was  given,  and  the  banks 
were  officially  closed  to  all  business  excepting  the 
collection  of  bills  receivable  in  the  depreciated 
currency  of  the  banks  themselves. 

Thus  by  a  series  of  cumulative  blows  the  whole 
Mexican  national  banking  system  which  had  been 
built  up  under  Diaz  was  destroyed  utterly.  At  the 
time  the  final  blow  was  given,  banknotes  were  ac- 
cepted at  about  30  per  cent  of  their  face  value,  and 


90  TRADING  WITH  MEXICO 

had  apparently  reached  stability.  Bankers  assure 
me  that  had  they  been  allowed  to  operate,  even 
under  the  conditions  then  prevailing,  they  could 
eventually  have  pulled  themselves  and  much  of  the 
business  of  the  country  out  of  the  hole.  It  is  also 
interesting  to  remember  that  the  franchises  of  the 
Banks  of  Issue  were  to  expire  in  1922,  time  suffi- 
cient, under  careful  government  leadership,  for 
them  to  wind  up  their  affairs  and  furnish  a  solid 
financial  basis  for  the  erection  of  some  new  form 
of  national  currency. 

The  Mexican  governments,  one  after  the  other, 
have  lent  what  prestige  they  had  to  a  proposed  and 
elaborate  new  banking  law,  based  on  a  "  Sole  Bank 
of  Issue."  From  Carranza's  time  the  men  in 
charge  of  the  government  finances  apparently  be- 
lieved that  this  system  could  be  established  on  the 
wrecks  of  the  ruined  Banks  of  Issue.  Up  to  the 
present  this  has  not  yet  been  attempted,  for  Mex- 
ico was  and  is  in  no  mood  to  receive  any  form  of 
paper  currency  or  government  banking,  however 
it  may  be  guaranteed. 

It  was  inevitable,  after  the  banks  were  closed, 
that  the  country  should  go  back  to  a  metallic  basis. 
This  was  made  more  difficult,  however,  by  the  gov- 
ernment's decree,  recently  reiterated  in  the  sum- 
mer of  1921,  making  illegal  the  circulation  of 
American  silver  and  banknotes.  This  plan,  al- 
though it  brought  out  the  Mexican  gold  and  silver 


THE  CREDIT  OF  THE  MEXICANS      91 

which  had  been  hoarded,  inevitably  cut  down  the 
circulating  medium  of  the  country  to  absolutely 
inadequate  proportions,  even  though  American 
money  could  easily  have  been  obtained  to  provide 
enough  currency  to  tide  over  the  crisis. 

There  were  many  difficulties  connected  with  the 
establishment  of  gold  and  silver  again,  but  most 
of  them  had  to  do  with  the  scarcity  of  these  me- 
diums. There  was  a  further  complication  for 
which  no  one  was  responsible.  This  was  the  phe- 
nomenal rise  in  the  price  of  silver  during  the 
Great  War.  This  early  became  a  crisis,  for  first 
the  silver  pesos  became  more  valuable  as  bullion 
than  the  fifty  cents  (American  money)  at  which 
they  had  been  fixed  in  the  time  of  Diaz,  and  soon 
even  the  subsidiary  coins,  of  a  lower  silver  con- 
tent, became  worth  more  than  their  legal  value  in 
gold.  The  export  of  silver  coins  had  to  be  stopped 
by  government  order,  and  under  the  guidance  of 
American  monetary  experts  the  recoinage  of  sil- 
ver in  smaller  pieces  was  begun.  To-day  this 
money  is  in  general  circulation,  accepted  at  face 
value  for  the  simple  and  deliberately  created  rea- 
son that  it  is  issued  only  as  the  crying  demands  of 
business  for  change  force  it  out.  The  new  pesos 
are  about  half  the  bullion  value  of  the  old,  and  the 
subsidiary  coins  are  even  less  valuable  in  propor- 
tion. 

Needless  to  say,  this  change  in  the  size  of  the 


92  TRADING  WITH  MEXICO 

silver  coins  had  an  unfavorable  effect  on  the  public 
mind,  already  on  edge  over  the  various  financial 
coups  of  the  Carranza  government.  This  was  ag- 
gravated by  a  destructive  form  of  favoritism  by 
which  a  few  men  were  allowed,  under  Carranza, 
to  buy  up  and  export  the  old  silver  coins,  a  form 
of  graft  which  amazes  and  disgusts  the  observer 
and  also,  be  it  noted,  made  the  money  shortage 
greater  and  less  easy  to  endure. 

The  ruin  of  the  economic  structure  of  Mexico 
lies  bare  for  any  one  to  see,  and  beneath  it  is  the 
rotted  structure  of  the  old  financial  system.  The 
closing  of  the  banks,  the  destruction  of  credit,  the 
shutting  off  of  the  relief  which  might  have  been 
given  by  the  use  of  American  currency,  seem  at 
the  root  of  most  of  the  ills  which  then  beset  Mex- 
ico, because  they  are  at  the  root  of  the  lack  of 
faith  of  the  people  and  their  fear  of  the  caprices  of 
the  morrow.  For  instance,  to-day  in  Monterey, 
the  great  industrial  center  of  northern  Mexico, 
there  are  no  banks  save  two  private  houses  where 
money  can  be  left  on  deposit,  and  a  few  exchange 
offices.  Where,  in  1910,  the  four  Banks  of  Issue 
had  more  than  $10,000,000  out  in  industrial,  min- 
ing and  farm  loans,  there  is  hardly  as  much  as 
$250,000  loaned  to-day,  and  that  is  by  American 
banks  on  the  border.  The  safe  commercial  paper 
which  circulates  in  Northern  Mexico  is  checks  on 
American  banks.  The  drafts  of  strong  mining 


THE  CREDIT  OF  THE  MEXICANS      93 

and  oil  companies  form  the  chief  basis  of  money 
transfer,  and  are  shipped  from  place  to  place  all 
over  Mexico.  Optimists  call  this  a  peaceful  pene- 
tration of  American  credit  into  Mexico,  and  so  it 
is,  but  all  that  can  be  done  from  outside  of  Mexico 
is  but  a  drop  in  the  bucket  compared  with  her 
financial  needs.  Credit  within  and  without  must 
be  established,  and  that  is  a  problem  which  rests 
with  Mexico  alone. 

To  understand  at  all  the  mountain  of  distrust 
which  looms  before  her,  it  is  necessary  to  set  down, 
briefly,  the  condition  of  the  Mexican  foreign  debt. 

The  external  government  debt  is  $173,000,000, 
and  on  this  interest  has  been  defaulted  for  more 
than  eight  years,  a  total  of  $50,000,000  remaining 
unpaid.  The  internal  national  debt  is  $67,000,000 
and  the  defaulted  interest  $20,000,000.  State  and 
other  debts  (save  railroads),  which  have  been 
guaranteed  by  the  government  are  $33,000,000  and 
$10,000,000  in  interest. 

The  bonds  of  the  National  Railways  of  Mexico, 
guaranteed  by  the  Mexican  government,  total 
$239,000,000,  the  interest  defaulted  being  about 
$75,000,000. 

With  other  items,  and  counting  alone  the  debts 
guaranteed  by  the  credit  of  the  government,  these 
obligations  total  $603,000,000,  and  the  unpaid  in- 
terest thereon  is  over  $155,000,000.  Unguaran- 
teed state  and  city  bond  issues,  the  $20,000,000 


94  TRADING  WITH  MEXICO 

recognized  as  due  the  banks  for  "loans,"  and 
$8,000,000  with  which  to  redeem  outstanding  fiat 
currency  bring  the  total  up  to  a  principal  of  $779,- 
120,915.  Nearly  eight  hundred  million  dollars, 
and  defaulted  interest  to  nearly  two  hundred 
million ! 

From  time  to  time,  and  government  after  gov- 
ernment, treasury  officials  have  come  to  New  York 
to  arrange  for  the  refunding  of  this  debt.  The 
plan  is  usually  for  New  York  bankers  to  loan  Mex- 
ico $300,000,000,  refund  the  whole  debt,  eliminat- 
ing some  items  (notably  by  a  reduction  of  the  bond 
issue  of  the  railroads)  and  take  as  security  the 
Mexican  government's  pledge  of  a  portion  of  the 
customs  duties. 

The  answer  to  this  proposition  has  been  aston- 
ishingly to  the  point.  No  Mexican  guarantee  of 
customs  receipts  has  interested  the  bankers  unless 
it  was  backed  by  the  United  States  government, 
presumably  with  a  collection  agency  of  American 
marines,  as  in  Haiti  and  Honduras  to-day.  The 
most  interesting  development  in  answer  to  the 
Mexican  suggestions  of  refunding  was  the  ap- 
pointment of  one  of  the  most  impressive  interna- 
tional banking  committees  ever  created  some  three 
years  ago.  This  was  headed  by  J.  Pierpont  Mor- 
gan and  announced  that  its  purpose  was  "the  pro- 
tecting of  the  holders  of  securities  of  the  Mexican 
republic  and  of  the  various  railway  systems  of 


THE  CREDIT  OF  THE  MEXICANS       95 

Mexico  and  generally  of  such  other  enterprises 
as  have  their  field  of  action  in  Mexico."  It  would 
seem  that  the  probity  of  the  Mexican  government, 
both  as  to  its  debts  and  as  to  its  willingness  to  re- 
pay the  losses  of  foreign  investors  was  slightly 
under  suspicion  in  the  financial  circles  of  the 
world,  a  suspicion  which  is  shared  by  no  other 
Latin- American  country  save  those  in  actual  and 
admitted  bankruptcy. 


CHAPTER  V 

OUB   BILL   AGAINST    EEVOLUTIONAEY    MEXICO 

THE  American  after-dinner  orator  roars  Ms 
boast  of  "two  billions  of  American  dollars  in 
Mexico"  and  moans  Ms  claim  of  "a  billion  of 
damage  "  done  to  those  pioneer  American  dollars. 
Whereupon  the  Mexican  (of  whatever  political 
complexion)  wails  protest  that  three-quarters  of 
those  American  dollars  were  made  out  of  Mexico 
herself,  and  our  State  Department,  which  alone 
might  claruy  the  matter,  perforce  keeps  silence. 
Up  to  the  present  time  few  have  attempted  to 
bridge  the  gulf  between  the  orator  and  the  Mexi- 
can and  no  one  that  gulf  between  the  orator  and 
the  State  Department.  We  live  in  an  age  of  ' l  con- 
victions "  and  we  choose  our  figures  according  to 
our  beliefs. 

Fifteen  years  ago  an  American  consul  in  Chi- 
huahua, Marion  Letcher,  wrote  a  report  in  which 
he  estimated  (frankly  without  figures)  that  the 
total  foreign  investments  in  Mexico  were  $1,641,- 
054,180,  distributed  as  follows: 

American    $1,057,770,000 

British     321,302,800 

French    143,446,000 

Various    118,535,380 


Total    11,641,054,180 

96 


OUR  BILL  AGAINST  MEXICO         97 

These  figures  have  been  assailed,  especially  as 
regards  the  comparatively  small  sum  alloted  to 
the  British,  but  they  remain  to  this  day  the  only 
official  estimate  available.  I  have,  however,  been, 
able  to  find  another  compilation,  worked  out  also 
by  Americans,  but  this  by  the  research  depart- 
ments of  several  large  banking  groups,  with  full 
access  to  all  Mexican  government  figures  and  to 
the  stock  books  of  most  of  the  great  American 
companies.  The  total,  which  is  for  1914,  before 
the  vast  bulk  of  the  investment  in  oil,  is  almost 
identical,  but  the  distribution  is  startlingly  dif- 
ferent : 

American    $655,000,000 

British 670,000,000 

French 285,000,000 

German 75,000,000 

Spanish,  Dutch,  etc 190,000,000 


Total  $1,875,000,000 

These  figures  claim  to  include  the  foreign  invest- 
ment in  the  National  Debt  of  Mexico  and  are  said 
to  estimate  the  actual  distribution,  as  far  as  can 
be  worked  out,  of  the  holdings  of  the  securities 
of  all  companies  operating  in  Mexico.  Consul 
Letcher's  figures  were  conceivably  based  largely 
on  the  nationality  of  the  corporations  alone.  On 
the  other  hand,  Europe  contributed  more  than  half 
the  invested  capital  of  such  important  groups  as 


98  TRADING  WITH  MEXICO 

the  National  Railways  of  Mexico,  made  up  of 
companies  which  were  all  incorporated  under 
American  laws. 

When  this  new  compilation  of  investment  dis- 
tribution first  came  to  my  hands,  I  was,  I  may 
admit,  inclined  to  * '  split  the  difference. ' '  As  care- 
ful a  study  of  the  American  investment  field  as  it 
is  possible  to  make  has,  however,  convinced  me 
that  the  new  figures  are  much  more  nearly  correct 
than  those  of  Consul  Letcher  with  one  exception. 
I  do  not  believe  that  they  include  all  the  American 
investment  in  the  Mexican  government,  state  and 
municipal  bonds  held  abroad. 

On  the  other  hand,  neither  Consul  Letcher 's 
figures  nor  the  other  compilation  represent  the 
actual  full  value  of  American  investments  in  Mex- 
ico at  the  fall  of  Diaz  in  1911.  It  is  important  that 
this  fact  be  remembered  because  by  that  date  the 
moneys  which  had  gone  into  Mexico  for  foreign 
enterprise  had  increased  many  fold  through  the1 
energy  which  went  with  them  and  pushed  them 
forward  to  success.  I  believe  that  the  original 
American  investment  had  grown,  by  1911,  to  fully 
$2,000,000,000,  but  in  order  to  be  absolutely  just 
from  the  Mexican  viewpoint  we  can  discuss  the 
damages  on  the  basis  of  the  actual  cash  invested— 
the  loss,  incidentally,  looms  even  greater.  On 
the  other  hand,  we  must  not  forget  that  however 
the  Mexicans  may  claim  that  the  increase  in  val- 


OUR  BILL  AGAINST  MEXICO          99 

ues  represents  an  "  exploitation "  of  their  coun- 
try's resources,  the  concomitant  advance  in  all 
values  throughout  the  land  in  the  era  of  Diaz  was 
almost  entirely  the  direct  result  of  those  same 
foreign  enterprises. 

From  many  sources,  including  of  course  the  two 
authorities  which  have  been  quoted,  I  have  esti- 
mated the  American  investment  of  actual  cash 
capital  and  have  set  against  it  the  losses  in  actual 
physical  damage  and  in  ruined  business,  since 
1910,  as  follows : 

AMEBICAN  CAPITAL  IN  MEXICO 

Original  Physical  Actual 

Investment  Damage  Losses 

Railroads $150,000,000  $30,000,000  $60,000,000 

Oil   200,000,000  5,000,000  100,000,000 

Mines    200,000,000  15,000,000  100,000,000 

Lands  and  cattle  . . .  50,000,000  10,000,000  20,000,000 
Industries  and  public 

service 50,000,000  10,000,000  20,000,000 


Total $650,000,000        $70,000,000      $300,000,000 

Damage  claims  aggregating  $500,000,000  are 
said  to  have  been  filed  with  the  American  State 
Department,  but  no  official  confirmation  of  this 
has  ever  been  forthcoming.  However,  the  claims 
which  Americans  have  against  Mexico,  whether 
filed  in  the  State  Department  or  not,  must  be  di- 
vided into  two  categories,  the  actual  and  the  po- 
tential damage,  and  perforce  includes  also  the 
claims  due  for  loss  of  life  and  personal  damages. 

The  actual  harm  already  done  includes :  physi- 
cal damage  to  property ;  unwarranted  and  illegiti- 


100  TRADING  WITH  MEXICO 

mate  taxes  which  approach  confiscation;  destruc- 
tion of  property  values  through  such  taxation  and 
through  the  prevalence  of  banditry;  destruction 
of  property  values  by  the  driving  out  of  stable 
government ;  destruction  of  the  financial  and  credit 
system  of  the  country  through  government  de- 
crees and  repudiations ;  losses  in  legitimate  profits 
which  would  have  been  made  during  the  recent 
eras  of  high  prices ;  actual  loss  in  market  value  of 
property  through  the  estrangement  of  the  foreign 
capital  which  alone,  in  Mexico,  presents  a  reliable 
buying  element;  destruction  of  property  values 
through  the  exile  of  the  foreigners  who  formed  the 
industrious  and  capable  organization  which  main- 
tained those  values. 

The  potential  damages  are  chiefly  those  which 
come  from  the  fact  that  there  hangs  over  all  for- 
eign property  in  Mexico  to-day,  and  has  hung  for 
five  years,  a  sword  of  Damocles  in  the  threatened 
confiscation  of  such  property  under  the  radical 
"nationalization"  plans  of  the  revolutionary  gov- 
ernments. These,  briefly,  provide  that:  foreign 
corporations  and  individuals  are  incompetent  to 
own  property  in  Mexico  unless  they  renounce 
their  citizenship  and  appear  only  as  Mexicans  be- 
fore the  Mexican  law ;  the  government  may  appro- 
priate all  large  tracts  of  land,  giving  in  return  un- 
guaranteed state  agrarian  bonds  of  virtually  no 
value;  the  government  may  "nationalize"  the  oil 


OUR  BILL  AGAINST  MEXICO        101 

in  the  ground,  making  it  subject  to  the  denounce- 
ment of  any  one,  whether  the  property  owner  or 
not,  when  the  whole  oil-producing  organization 
of  Mexico  to-day  is  founded  on  the  principle  of  the 
oil  belonging  to  the  land  itself;  no  foreigners, 
under  any  conditions,  may  own  any  land  within 
sixty  miles  of  the  frontier  or  thirty  miles  of  the 
seacoast. 

Lastly,  and  in  a  group  by  itself,  are  the  damage 
claims  arising  from  the  killing  of  nearly  600  Amer- 
ican citizens  in  Mexico  since  the  Madero  revolu- 
tion began  in  1910.  The  claims  for  these  outrages 
and  for  the  maiming  and  raping  of  many  hundreds 
more  occupy  a  class  by  themselves,  and  will,  we 
may  confidently  believe,  be  the  first  which  will  be 
paid  when  Mexico  returns  to  the  ways  of  civiliza- 
tion. 

Just  here  we  can  imagine  the  official  Mexican 
"press  department"  preparing  to  state  that 
"Mexico  has  always  paid  her  bills,  including  all 
damage  claims."  This,  however,  is  not  quite  lit- 
erally true.  She  has  paid  foreign  damage  claims 
at  the  muzzles  of  foreign  cannon,  to  be  sure,  and 
President  Diaz,  in  that  long  rule  which  many  call 
"the  anomaly  of  Mexican  history"  paid  all  the 
bills  presented  to  him.  But  the  only  "conven- 
tion" which  ever  sat  to  adjudicate  American  dam- 
age claims  was  hardly  the  success  that  would  jus- 
tify any  such  sweeping  assertion  of  Mexico's  pro- 


102  TKADING  WITH  MEXICO 

bity.  In  1840,  after  years  of  turmoil,  and  after  a 
show  of  force,  President  Jackson  called  a  conven- 
tion of  Americans  and  Mexicans  together  to  con- 
sider American  damage  claims.  They  sat  from 
1840  to  1842,  allowed  $2,000,000  in  damage  claims, 
rejected  $1,000,000  and  when  they  adjourned  left 
$3,000,000  still  to  be  considered.  Under  an  ar- 
rangement of  twenty  installments,  Mexico  paid 
three  and  defaulted  the  rest.  The  cash  was  paid 
by  the  United  States,  and  the  slate  was  wiped 
clean  after  the  Mexican  war  of  1847-48.  Finally, 
this  war,  which  as  schoolboys  we  were  taught  to 
regard  as  a  sort  of  "blot  on  the  national  escut- 
cheon" was  the  result  of  continued  outrages  to 
Americans  and  continued  diplomatic  jockeyings 
with  an  Uncle  Sam  who  even  then  was  much  the 
same  model  of  patience  which  he  is  to-day. 

In  the  public  discussion  of  the  damage  which  has 
been  done  to  American  properties  in  Mexico,  there 
has  been  much  emphasis  on  the  potential  harm 
from  the  so-called  "  socialistic "  or  "bolsheviki" 
tenets  of  the  new  Mexican  constitution.  There 
have  been  vast,  crippling  losses,  yet  it  seems  as  if 
most  of  what  we  have  heard  has  been  the  things 
which  will  happen  if  Mexico  is  allowed  to  proceed 
along  her  present  road.  There  is  reason  enough 
for  this  fear  and  for  this  emphasis,  and  one  of  the 
great  battles  being  fought  in  the  world  to-day  is 
that  which  these  Americans  are  putting  up  not 


OUR  BILL  AGAINST  MEXICO        103 

alone  for  themselves  but  for  the  very  principles 
of  property  rights.  But  so  far  Mexico  and 
particularly  the  wily  gentlemen  who  have  occu- 
pied the  Mexican  presidential  chair  have  always 
tried  to  get  all  they  could  and  have  often  carried 
the  mis-named  " American"  bluff  to  astonishing 
lengths — but  have  almost  as  often  retired  when  the 
game  turned  against  them.  They  have  used  the 
potential  damage  as  a  means  of  extracting  an 
increasing  toll  of  taxes  and  of  loot,  and  for  little 
else,  as  yet. 

In  this  chapter  I  am,  as  already  mentioned,  in- 
tentionally avoiding  taking  these  "potential  dam- 
ages" into  consideration.  I  feel  that  we  must 
have,  as  a  starting  point,  a  comprehensible  picture 
of  what  has  already  actually  happened  to  Ameri- 
can investments  in  Mexico. 

Most  of  the  American  money  in  Mexico  went  to 
that  country  during  the  thirty-four  years  of  Diaz 
rule.  This  period  was  marked  not  by  blind  adora- 
tion of  the  foreigner,  as  the  revolutionists  now 
state,  but  by  a  sane  and  far-seeing  realization  that 
foreign  capital  must  come  to  Mexico  if  her  na- 
tional and  economic  potentialities  were  to  be  de- 
veloped. Foreigners  were  encouraged  generously 
by  laws  recognizing  the  privileges  of  pioneers  in 
protection  and  in  assistance  in  the  form  of  ex- 
emption from  taxes  during  their  development 
period  (the  term  was  usually  for  ten  years).  The 


104  TRADING  WITH  MEXICO 

idea  was  to  allow  them  to  import  machinery  with- 
out duties  and  get  on  their  feet  as  quickly  as  pos- 
sible. Practically  none  of  these  companies  was 
given  land,  for  there  is  no  vacant  Mexican  govern- 
ment land  worth  having. 

The  first  and  the  greatest  American  corpora- 
tions to  enter  Mexico  were  the  railroads.  These 
held  concessions,  made  according  to  law,  but  Mex- 
ico had  profited  by  the  American  government's 
experience  with  its  trans-continental  lines,  and  the 
subsidies  and  grants  were  small  indeed  compared 
with  those  given  to  our  Union  Pacific,  for  instance. 
It  is  worth  noting  also  that  there  have  never  been 
such  scandals  as  our  great  railroads  reveled  in, 
and  that  virtually  every  cent  was  invested  in  the 
lines  themselves.  The  Mexican  railway  companies 
which  were  consolidated  in  1907  into  the  National 
Railways  of  Mexico  were  never  paying  ventures 
for  the  builders,  and  until  the  merger  few  divi- 
dends had  ever  been  paid  by  any  of  the  lines.  For 
about  four  years  following  the  merger  conditions 
improved  greatly,  but  in  1912  troubles  began,  and 
by  1913  all  was  chaos  and  destruction. 

From  then  on  to  to-day,  the  story  of  the  rail- 
ways of  Mexico  has  been  a  tragic  romance.  It 
can  be  reduced  to  figures,  necessarily  cold  in  the 
telling,  but  every  figure  the  result  of  dramatic  and 
crushingly  realistic  incident.  The  National  Rail- 
ways of  Mexico,  a  property  worth  over  $250,000,- 


OUR  BILL  AGAINST  MEXICO        105 

000  as  a  physical  plant  alone,  was  taken  over  by 
the  Carranza  government  on  December  4,  1914, 
and  since  that  time  the  bondholders  have  received 
no  cent  of  interest  and  the  physical  property  has 
been  crushed  and  battered  and  all  but  destroyed. 
On  January  1  of  1921  over  $75,000,000  of  back  in- 
terest was  unpaid  and  the  defaulted  payments  on 
fixed  charges  is  still  piling  up  at  the  rate  of  $1,- 
000,000  a  month,  while  the  Mexican  government  is 
collecting  from  the  operating  commission  $1,500,- 
000  a  month — a  sum  set  by  Garranza  for  the  com- 
mission to  turn  in  by  any  means  available,  as 
higher  rates,  scrimping  on  repairs,  deterioration 
in  upkeep. 

The  confiscation  of  the  railway  properties  by 
the  Mexican  government  under  Carranza  is  one 
of  the  most  astonishing  and  illuminating  pages  in 
the  whole  story  of  Carranza 's  campaign  against 
capital  and  the  foreigners.  But  although  it  be- 
gan with  him,  it  apparently  has  continued  into 
the  rule  of  his  successors — for  they  seem  a  part 
of  the  revolution  of  which  he  was  and  still  is  the 
dominating,  sinister  genius.  Under  the  terms  of 
the  merger  of  1907,  the  Mexican  government  was 
given  the  voting  power — but  not  the  title  to — 50 
per  cent  of  the  stock  of  the  company,  under  cer- 
tain definite  conditions  laid  down  by  the  bond- 
holders. This  50  per  cent  interest  represented 
no  capital  invested,  nor  was  it  a  recognition  of  any 


106  TRADING  WITH  MEXICO 

debt  which  the  railways  might  have  imagined  they 
owed  the  government.  It  was  given  outright  in 
consideration  of  one  thing,  the  guaranteeing  by 
the  Mexican  government  of  a  return  of  4  per  cent 
interest  on  the  bonds  of  the  merged  lines.  To  the 
merger  the  government  contributed  nothing  of 
tangible  value — save  one  short  line  of  railway 
worth  about  $5,000.  Its  permission  was  needed, 
perhaps,  for  the  transfer  of  the  railway  conces- 
sions to  the  merger,  but  this  would  probably  have 
been  given  without  question  had  it  been  asked 
alone.  The  interests  back  of  the  merger  believed 
that  the  Mexican  government  guarantee  of  the  in- 
terest on  the  bonds  was  worth  the  gift  of  the  vot- 
ing right  of  half  the  common  stock — and  on  this 
understanding  alone  it  was  given. 

The  taking  over  of  the  physical  property  by  the 
Mexican  government  followed  the  American  occu- 
pation of  Vera  Cruz  in  1914,  and  shortly  after- 
wards Carranza  made  his  claim  official,  on  the 
ground  of  the  50  per  cent  voting  right!  On  the 
basis  of  this  right  alone  the  Mexican  government 
to-day  holds  control  of  the  National  Railways  of 
Mexico,  a  right  once  given  on  the  solemn  guaran- 
tee of  the  interest  on  the  bonds — which  has  not 
been  paid  for  eight  years — and  with  the  recog- 
nized provision  that  the  bondholders  should  name 
the  president  of  the  lines,  and  various  officials  and 
members  of  the  board — and  to-day  there  is  not 


OUR  BILL  AGAINST  MEXICO        107 

one  official  who  is  not  a  creature  of  the  govern- 
ment which  happens  to  be  in  power  in  Mexico ! 

Upon  such  a  basis  rests  the  title  of  the  Mexican 
government  to  the  National  Railways.  The  sub- 
sidies paid  by  the  Diaz  government  in  years  gone 
by  for  construction  were  given  as  the  subsidies 
were  given  to  the  American  railways  which 
crossed  the  prairies  to  the  Pacific  coast — to  make 
such  construction  possible  in  recognition  of  their 
benefit  to  the  country.  The  Mexican  subsidies 
were  less  than  those  given  to  the  Union  Pacific 
by  the  United  States  government  and  not  one 
touch  of  scandal  (such  as  marked  our  own  railway 
development)  was  ever  breathed  against  that  of 
Mexico.  The  subsidies  give  no  tangible  claim  to 
the  lines — and  as  far  as  I  know  have  never  been 
advanced  as  a  claim.  The  only  hold  of  Mexico 
over  those  properties  is  the  shadowy  title  con- 
veyed by  the  voting  right  of  a  block  of  stock  given 
voluntarily  by  the  bondholders  in  return  for 
guarantees  which  have  been  thrown  to  the  winds 
for  these  eight  years. 

In  the  period  since  the  government  has  had 
control  of  the  lines,  the  physical  property  has  de- 
teriorated to  a  point  where  only  the  magnificently 
solid  work  done  by  the  American  builders  to-day 
holds  them  together.  Operated  by  the  Mexicans, 
with  former  firemen  as  general  superintendents 
and  minor  native  clerks  as  high  officials,  the  prop- 


108  TRADING  WITH  MEXICO 

erties  went  their  way  of  slow  destruction  in  the 
days  of  Carranza.  Since  that  time,  the  turnover 
of  railway  officials  has  eliminated  many  of  the 
employees  who  were  trained  under  the  American 
executives  of  the  Diaz  and  Madero  time,  and  to-day 
the  roads  are  in  the  hands  of  men  who  learned  all 
they  know  of  the  railway  business  from  those  who 
in  their  turn  had  gleaned  their  little  knowledge 
from  their  American  chiefs — now  gone  from  Mex- 
ico eight  years.  The  result  is  a  ruin  comparable 
to  nothing,  probably,  but  the  ruin  of  railway  prop- 
erties in  Russia  to-day. 

Of  the  more  than  800  locomotives  owned  in  1914, 
only  333  (by  tlib  notoriously  inaccurate  Mexican 
government  figures)  are  said  to  be  running.  The 
rest  lie  at  the  bottoms  of  canons  or  are  rusting  in 
banks  of  hundreds  in  shop  yards,  as  I  have  this 
year  seen  and  counted  over  100  in  the  one  yard  of 
Monterey.  The  freight  cars  have  decreased  from 
18,000  to  7,000,  and  usable  passenger  cars  are 
virtually  unknown  off  the  main  lines  to-day — all 
were  wantonly  destroyed  in  the  early  revolution 
or  stolen  and  converted  into  dwelling-places  for 
"deserving  revolutionaries."  Three-quarters  of 
all  the  bridges  on  the  8,000  miles  of  line  are  dam- 
aged, dozens  of  them  beyond  repair,  thanks  to  the 
diabolical  perfection  of  the  methods  of  destruc- 
tion used  by  various  Mexican  patriots.  The  tie 
replacements  are  seven  years  behind;  nearly  20,- 


OUR  BILL  AGAINST  MEXICO        109 

000,000  are  needed,  worth  over  $17,000,000.  Other 
items  in  the  $80,000,000  replacement  bill  are  $30,- 
000,000  for  cars,  $12,000,000  for  locomotives  and 
$4,000,000  for  rails. 

This  loss  has  been  the  result  of  two  forms  of 
destruction — the  depredations  of  the  fighting  fac- 
tions and  the  cumulative  destruction  of  neglect 
and  failure  in  upkeep.  Instances  multiply.  Dur- 
ing one  month  (March,  1914)  seventy  trains  were 
blown  up  while  running  at  30  to  40  miles  an  hour ; 
the  patriots  used  to  connect  up  their  dynamite 
with  electric  batteries  and  then  sight  along  two 
sticks  from  their  safe  retreat  in  the  bushes  and 
so  set  off  the  charge  under  whatever  section  of 
the  train  caught  their  fancy.  At  one  time  in 
Monterey  in  1915,  revolutionary  troops  burned 
800  loaded  freight  cars;  their  skeletons  line  the 
Monterey  sidings  for  all  the  world  to  see,  to-day. 
One  of  the  long  bridges  on  the  road  to  Eagle  Pass, 
on  the  American  border,  was  wrecked  by  running 
a  train  of  loaded  coke  cars  with  two  locomotives 
on  each  end  out  on  the  bridge,  firing  the  train  and 
blowing  up  the  bridge  when  the  burning  coke  had 
heated  the  steel.  A  similar  trick  on  the  Tampico 
line  was  to  take  out  a  rail,  then  set  fire  to  a  train 
of  oil  cars  and  run  it  full  speed  on  the  bridge, 
where  it  was  derailed  and  the  same  process  was 
followed  as  with  the  coke  train. 

The  rotting  of  the  ties  on  the  road  has  left  most 


110  TRADING  WITH  MEXICO 

of  the  branch  lines  all  but  impassable,  save  to  the 
Mexican  enginemen  who  know  each  bump  and  are 
quite   willing   to   "take   another  chance."     The 
wrecked  bridges,  jacked  up  on  timbers,  have  un- 
comfortable and  terrifying  "dips."    The  list  can 
be  multiplied  indefinitely.    Yet  perhaps  the  most 
expressive  sight  to  be  seen  in  Mexico  to-day  is 
those  banks  of  rusting  engines,  100  in  Monterey, 
100  at  Aguascalientes,  others  at  San  Luis  Potosi, 
Mexico    City   and   Guadalajara.     These   engines 
were  only  slightly  damaged  when  they  were  side- 
tracked, but  through  the  failure  of  the  government 
to  furnish  repair  materials,  they  have  been  gradu- 
ally stripped  of  parts  to  repair  other  engines,  the 
brasses  have  been  carried  off  and  sold  for  junk 
and  the  whole  field  of  ruin  left  like  a  desert  waste. 
There  is  in  the  Mexican  railway  law  a  provision 
for  compensation  in  case  the  railways  are  taken 
over  "for  military  purposes."     It  is  estimated 
that  under  this  law  the  damages  collectable  are 
only  $10,000,000  a  year— less  by  $2,000,000  than 
the  default  in  the  fixed  charges  alone.    The  esti- 
mated $80,000,000  of  physical  damage  (a  mere 
estimate  until  an  actual  valuation  can  be  made) 
is  presumably  collectable.     The  bill  of  the  rail- 
roads is,  however,   as  follows:  Physical  losses, 
$80,000,000;  defaulted  interest  to  June,  1921,  $75,- 
000,000;  total,  $155,000,000.     It  is  believed  that 
about  one-third  of  the  bonds  are  held  by  Ameri- 


OUE  BILL  AGAINST  MEXICO        111 

cans,  so  that  their  loss  is  over  $50,000,000.  In  ad- 
dition, there  has  been  an  individual  loss  in  the  dis- 
posal of  the  bonds  by  small  holders,  at  sacrifices  as 
great  as  80  per  cent.  It  is  even  said  that  the  Car- 
ranza  government  had  hopes  of  being  able  to  buy 
up  the  railway  bond  issue  when  its  administra- 
tive policies  had  reduced  the  quotations  to  less 
than  30  per  cent  of  par.  Only  the  lack  of  money 
prevented  this  coup  for  real  government  owner- 
ship, it  is  said. 

In  the  above,  I  have  treated  only  with  the  Na- 
tional Railways  of  Mexico.  Outside  of  this  sys- 
tem the  only  important  lines  in  Mexico  are  the 
Mexican  Eailway  (British  owned)  which  has  now 
been  returned  to  the  stockholders  but  without  com- 
pensation for  damages  and  the  Southern  Pacific 
in  Mexico  (American  owned).  The  former  suf- 
fered severe  physical  destructions,  but  the  latter *s 
bill  for  damages,  while  heavy,  sinks  into  relative 
insignificance. 

In  the  confines  of  a  general  study,  space  can  not 
be  given  to  the  sidelights  on  the  Mexican  railway 
situation — a  situation  almost  Teutonic  in  its  co- 
lossal blunders,  splendidly  American  in  the  ele- 
ments which  have  gone  to  save  it  from  utter  wreck. 
The  long  years  of  patient  railway  building,  the 
hundreds  of  miles  of  rock-ballasted  lines  across 
unproductive  wastes,  all  done  under  American 
management,  gave  Mexico  a  system  which  has  held 


112  TRADING  WITH  MEXICO 

together  despite  the  wreckage  of  bandits  and  the 
ravages  of  time  and  neglect.  The  traffic  of  the 
nation  moves  to-day,  not  in  the  wheezy  trains 
which  the  Mexicans  maintain,  but  overwhelmingly 
in  a  system  of  privately  owned  locomotives  and 
cars  operated  by  the  American  mining  and 
trading  companies  at  staggering  expense.  Their 
100  locomotives,  in  perfect  repair  (kept  so  in 
their  own  shops)  and  their  nearly  3,000  freight 
cars  probably  represent  half  of  the  railway  equip- 
ment running  on  the  National  Railways  to-day, 
and  they  probably  carry  far  more  than  half  the 
freight.  They  pay  full  freight  rates  in  addition 
to  furnishing  tlie  trains,  and  although  much  of 
this  equipment  has  been  taken  over  by  the  govern- 
ment as  this  is  written,  it  is  no  exaggeration 
to  say  that  but  for  these  American  companies  and 
their  magnificent  efforts  to  save  what  is  to  be 
saved  of  their  Mexican  properties  Mexico  would 
to-day  be  stagnant, — a  land  of  chaos  comparable 
only  to  the  period  of  fifty  years  ago,  before  Diaz 
ruled. 

The  great  oil  business  of  Mexico  owes  its  ex- 
istence primarily  to  American  enterprise.  Of  the 
$300,000,000  of  cash  invested  in  the  oil  fields, 
$200,000,000  is  American.  To-day,  even  after  the 
colossal  production  during  the  war,  only  a  small 
portion  of  this  investment  has  been  recovered,  for 
only  two  purely  Mexican  companies,  the  Mexican 


OUE  BILL  AGAINST  MEXICO       113 

Petroleum  (American)  and  the  Eagle  (British) 
are  paying  dividends.  The  oil  business  in  all  lands 
is  so  speculative  that  its  returns  are  quoted  not 
as  " dividends "  or  " interest, "  but  as  "recovery," 
for  until  the  great  investment  in  drilling,  tanks, 
pipe  lines,  refineries  and  ships  is  got  back,  there 
is  no  surety  that  the  venture  itself  will  prove  prof- 
itable. For  this  reason  the  losses  of  the  oil  com- 
panies through  the  Mexican  revolutions  can  be 
only  an  estimate.  From  sources  which  I  have  been 
able  to  reach,  I  place  the  actual  physical  losses 
at  about  $5,000,000  for  the  American  companies. 
This  seems  like  a  very  small  item,  but  it  does  not 
count  the  failures  of  most  of  the  300  companies 
which  have  put  money  into  Mexican  oil  or  the 
vast  sums  paid  in  taxes  or  lost  through  oppres- 
sion. Nor  does  it  take  into  consideration  the  po- 
tential losses  if  Mexico  enforces  her  "nationaliza- 
tion" plan.  These  last  would  be  legitimately  in- 
cluded here,  for  as  I  say,  they  jeopardize  the  "re- 
covery" of  the  investment  still  remaining  unpaid 
for,  and  Mexican  oil  stock  quotations  have  suf- 
fered as  a  result.  Mexico  still  threatens  to  en- 
force the  provisions  of  the  new  constitution  which 
make  oil  the  property  of  the  nation  and  its  ex- 
ploitation a  matter  of  concession,  like  gold  and 
silver.  The  oil  companies  are  fighting  this  plan, 
for  they  entered  Mexico  and  invested  millions  in 
oil  lands  and  leases  from  individuals  (no  land 


114  TRADING  WITH  MEXICO 

was  ever  given  them)  under  a  mining  law  which 
left  coal  and  oil  the  property  of  the  owner  of  the 
land,  unlike  gold  and  all  other  minerals. 

The  actual  bill  of  our  oil  companies  includes,  as 
the  chief  single  item,  a  $2,000,000  loss  due  to  the 
Battle  of  Ebano,  fought  over  American  property 
in  the  spring  of  1915.  Oil,  tanks,  pipe  lines  and 
refinery  buildings  were  destroyed,  a  single  cannon 
ball  igniting  a  tank  containing  850,000  barrels  of 
oil,  all  of  which  was  burned.  The  item  of  direct 
thievery  (largely  by  federal  troops)  is  only  about 
$300,000,  but  petty  destruction,  murderous  as- 
saults, the  killing  of  a  score  of  valuable  employees 
and  the  tribute  to  bandits  and  federal  " generals" 
pile  the  total  up.  Tribute  has  been  levied,  first 
by  the  federal  Carrancistas,  and  from  January, 
1915,  to  March,  1920,  by  Manuel  Pelaez,  the  former 
rebel  leader,  to  a  total  of  about  $2,000,000,  Pe- 
laez 's  figure  being  a  regular  $30,000  a  month  up 
to  his  joining  the  successful  Obregon  revolution 
in  1920  and  so  becoming  a  "federal." 

The  ravaging  of  the  oil  wells  is  full  of  pictur- 
esque and  terrible  incident,  like  the  railways.  The 
most  striking  and  costly  was  the  outrage  perpe- 
tated  by  General  Candido  Aguilar,  son-in-law  of 
Carranza.  On  December  13,  1913,  Aguilar  de- 
manded, from  the  Eagle  Oil  Company  (British) 
tribute  to  the  sum  of  $10,000.  This  was  not  forth- 
coming so  Aguilar  proceeded  to  carry  out  his 


OUK  BILL  AGAINST  MEXICO       115 

threat  of  "shutting  in"  the  great  "El  Portrero" 
well,  one  of  the  most  famous  in  Mexican  oil  his- 
tory, which  had  been  a  steady  producer,  for  two 
and  a  half  years,  of  30,000  barrels  per  day.  He 
succeeded  in  capping  it,  and  before  the  casing  was 
finally  blown  out,  the  oil  had  broken  through 
the  ground  in  dozens  of  places,  including 
the  bed  of  a  neighboring  river.  The  whole 
countryside  was  in  imminent  danger  of  a 
terrible  holocaust  if  the  oil  on  the  river  flowed 
away  and  ignited,  as  it  surely  would,  but  by  super- 
human efforts  this  danger  was  averted.  But  all 
other  attempts  to  save  the  oil  and  repair  the  dam- 
age were  almost  fruitless,  and  for  months  the  see- 
page went  on,  until  at  last  the  well  was  reduced  to 
salt  water  and  $20,000,000  worth  of  oil  had  been 
lost.  This  loss  is  technically  British,  although  it 
is  probable  that  the  bill  for  damages  will  fall  upon 
the  United  States,  for  it  was  undoubtedly  through 
the  instrumentality  of  our  State  Department  and 
its  emphasis  of  the  Monroe  Doctrine  that  Great 
Britain  was  restrained  from  taking  action. 

Another  item  to  be  noted  is  the  great  Carranza 
tax  system  which  continued  in  full  force  into  the 
era  of  Obregon  and  costs  the  oil  companies  some 
$4,000,000  per  month.  Part  of  this  may  be  recog- 
nized in  time  as  legitimate,  but  it  violates  the 
letter  of  the  franchises  of  most  of  the  companies. 
To  this  bill  of  claims  will  also  be  added  the  losses 


116  TRADING  WITH  MEXICO 

incident  to  carrying  out  the  orders  of  our  Depart- 
ment of  State  for  all  Americans  to  withdraw  from 
Mexico  on  two  occasions.  Each  time  about  one 
month's  production  was  lost. 

I  have  noted  above  the  far-reaching  possibilities 
of  destruction  to  oil  properties  entailed  in  the 
"nationalization"  plans.  While  these  are  in 
abeyance  pending  "investigation  and  legislation" 
the  oil  companies  have  other  drains  on  their  re- 
sources, such  as  government  levies  for  dredging 
the  river  at  Tampico  (while  the  companies'  own 
dredges  do  the  work),  the  requirement  of  special 
licenses  to  drill  each  well,  and  the  virtual  curtail- 
ment of  all  development  work  outside  the  Tam- 
pico-Tuxpam  district.  All  add  to  the  total  loot 
of  the  revolutionists,  and  continue  the  threat 
against  foreign  business  development  throughout 
all  Mexico. 

About  $200,000,000  of  American  money  has  gone 
into  mining  in  Mexico.  Practically  all  of  it  has 
been  legitimate  business  investment,  in  low  grade 
or  old  abandoned  bonanza  properties,  in  mills  and 
in  smelters — the  speculative  period  of  bonanza 
mining  such  as  we  have  had  in  our  own  West  was 
passed  in  Mexico  a  century  before  American 
money  began  to  flow  across  the  Rio  Grande.  Our 
American  investment  could  therefore  by  no  means 
be  regarded  as  a  speculative  venture,  and  the 
margin  of  return  was  relatively  small — so  small 


OUR  BILL  AGAINST  MEXICO        117 

in  fact  that  Mexicans  did  not  and  would  not  now 
consider  such  mining  as  profitable  investment. 
We  are,  therefore,  justified  in  taking  a  serious 
and  calculating  view  of  the  damage  done  to  Amer- 
ican mining  properties  under  revolutionary  rule. 

From  sources  available,  I  would  estimate  the 
damage  done  American  mining  properties  in  Mex- 
ico at  $15,000,000 — this  is  very  conservative. 
There  has,  however,  been  little  of  the  wanton  de- 
struction of  mines  such  as  the  Germans  practiced 
in  Northern  France.  One  instance,  however, 
stands  out,  and  this  was  to  a  coal  mining  property 
in  northern  Mexico,  the  Agujita,  less  than  100 
miles  south  of  Eagle  Pass,  Texas.  In  May,  1913, 
General  Jesus  Carranza,  brother  of  the  president, 
demanded  $50,000  from  the  manager  of  this  prop- 
erty, owned  by  American  and  other  foreign  capi- 
tal. The  money  was  not  on  the  ground  and  there 
was  no  telegraphic  communication  with  Mexico 
City,  so  it  could  not  be  paid.  The  property  was 
then  wrecked  by  Carranza  soldiers,  several  hun- 
dred coke  ovens  blown  up,  the  mines  fired  and 
flooded,  buildings  burned,  etc., — damage  estimated 
at  $1,000,000. 

Some  other  incidents  of  this  sort  are  recorded, 
but  the  largest  physical  damage  is  indirect,  due 
to  the  driving  off  of  workers  and  the  murder  of  the 
American  engineers,  so  that  great  mining  proper- 
ties were  abandoned  temporarily  with  the  result 


118  TBADING  WITH  MEXICO 

that  the  water  came  in  and  tremendous  values  in 
timbering  and  stoping  have  been  destroyed.  In 
some  instances  the  damage  caused  by  water  has 
mounted  up  to  vast  sums;  one  great  mine,  the 
Tiro  General,  an  American  property,  will  for  in- 
stance require  $300,000  before  it  can  be  operated 
again.  Other  properties  abandoned  from  time  to 
time  during  the  years  when  railway  traffic  was  in- 
terrupted, have  similar  bills  for  repairs,  and  hun- 
dreds of  other  mines,  great  and  small,  have  been 
kept  closed  through  the  most  profitable  period 
mining  has  ever  known  (that  during  the  Great 
War),  with  vast  losses,  although  the  ore  is  of 
course  still  in  the  ground  and  will  some  day  be 
taken  out. 

The  decrees  and  laws  put  into  effect  by  the  Mex- 
ican government  in  its  effort  to  raise  money  have 
had  a  serious  effect  on  mining.  There  have  been 
new  export  taxes  on  metals,  for  instance,  5  per 
cent  on  lead,  copper  and  zinc,  where  before  noth- 
ing was  assessed,  and  in  some  cases,  as  in  that  of 
copper,  definite  sums  per  pound  have  been  as- 
sessed, with  the  result  that  the  falling  copper 
prices  caused  the  closing  of  great  properties  like 
that  of  Cananea  ^American)  and  El  Boleo 
(largely  French).  Silver  and  gold  were  taxed  10 
per  cent  as  against  2%  per  cent  in  the  old  days; 
during  the  war  the  export  of  gold  was  prohibited 
and  half  of  the  value  of  the  silver  exported  had 


OUR  BILL  AGAINST  MEXICO        119 

to  be  returned  to  Mexico  in  gold.  Taxes  on  min- 
ing claims  also  have  been  increased  tremendously, 
so  that  in  1916  a  group  of  forty-five  American 
companies  estimated  for  the  American-Mexican 
commission  sitting  in  Atlantic  City  that  where  in 
1912  they  paid  $96,000  in  taxes  on  a  group  of 
claims  the  new  laws  would  have  collected  $569,- 
000  and  where  in  1912  the  export  taxes  were  $1,- 
726,000,  the  export  taxes  on  the  same  quantity  of 
metal  (if  it  had  been  taken  out,  which  it  was  not) 
would  have  been  $7,000,000. 

During  the  war,  only  high  metal  prices  kept  any 
mining  business  going  in  Mexico.  After  the  ar- 
mistice, hundreds  of  mines  and  all  but  a  few 
smelters  were  closed  down,  and  only  the  high  price 
of  silver,  as  long  as  it  continued,  allowed  those 
that  were  left  to  keep  running.  Even  during  the 
era  of  high  prices  it  was  impossible  for  the  mines 
which  were  operating  to  do  the  development  work 
which  alone  makes  possible  the  continued  opera- 
tion of  mines  under  modern  conditions. 

Due  to  taxation,  heavy  freight  costs,  scarcity  of 
materials  and  of  labor,  bandit  raids  and  uncertain 
supplies,  the  science  of  mining  in  Mexico  thus 
slipped  back  thirty  years.  This,  in  a  phrase,  sums 
up  the  reason  for  the  losses  and  the  conditions 
which  make  it  impossible  for  mines  to  operate  to- 
day where  in  times  of  ordered,  intelligent  govern- 
ment, they  were  running  and  supporting  hundreds 


120  TEADING  WITH  MEXICO 

of  thousands  of  Mexicans  in  comfort  and  peace. 

Figures  presenting  the  case  of  the  land  and  cat- 
tle companies  are  almost  impossible  to  obtain,  for 
these  interests  have  never  organized  as  the  oil  and 
mining  men  have,  and  the  only  possible  sources  of 
such  information  have  not  been  able  to  collect 
figures  enough  to  cover  the  situation.  Roughly, 
however,  it  is  estimated  that  $50,000,000  of  actual 
American  money  has  been  invested  in  land  in  Mex- 
ico, and  although  the  titles  to  the  properties  still 
remain  (always  subject  to  the  proposed  confisca- 
tion of  foreign  property),  the  loss  in  capital  in- 
vested, of  live  stock  and  crops,  can  probably  be 
placed  at  over  $30,000,000.  The  land  companies 
and  individual  American  holders  of  lands  have, 
however,  been  the  greatest  sufferers,  perhaps,  of 
all  the  interests,  for  the  actual  worth  of  the  land 
they  occupied  was  infinitesimal  compared  with  the 
value  which  their  very  presence  and  industry  crea- 
ted for  it. 

The  Mormon  colonies  of  northern  Chihuahua, 
near  Casas  Grandes,  were  amongst  the  most  pros- 
perous, in  a  comparatively  large  way,  of  all  the 
agricultural  sections  of  Mexico.  Here  the  ' l  desert 
blossomed  as  the  rose"  and  the  American  colo- 
nists, industrious  and  prosperous,  were  becoming 
valuable  contributors  to  the  Mexican  national 
wealth.  All  this  has  been  swept  away,  houses 


OUR  BILL  AGAINST  MEXICO        121 

burned,  cattle  run  off,  men,  women  and  even  the 
children  murdered  and  maltreated,  and  the  whole 
enterprise  all  but  destroyed.  The  case  is  paral- 
leled all  over  the  country. 

Millions  of  dollars  have  been  invested  by  Amer- 
icans in  tropical  plantations,  and  some  at  least  of 
the  properties  were  of  great  potential  value.  The 
story  of  the  wrecking,  raiding,  pillaging  and  mur- 
dering on  these  properties  would  cover  pages  and 
the  sums  actually  lost  and  the  values  destroyed 
by  the  interruption  of  development  run  up  into 
great  totals. 

At  the  other  end  of  the  country,  in  Sonora,  the 
records  show  the '  systematic  ruin  of  the  Yaqui 
Delta  Land  and  Water  Co.,  which,  beginning  under 
President  Madero,  had  invested  $3,000,000  in  land, 
surveys  and  experiment  stations  and  was  turning 
a  great  property  worthless  for  anything  but  graz- 
ing, into  a  paradise  of  irrigated  farms.  Begin- 
ning with  Carranza  and  continuing  steadily  since 
this  company's  property  has  been  despoiled,  and 
by  means  of  confiscatory  legislation,  new  inter- 
pretations of  franchises  and  overwhelming  taxa- 
tion has  been  reduced  to  ruin  and  even  the  govern- 
ment franchise  itself  finally  annulled.  The  Mex- 
icans have  no  plans  and  no  money  to  do  such  vast 
development  themselves,  so  the  destruction  of  this 
property,  pushing  it  back  to  the  mere  value  of  the 


122  TRADING  WITH  MEXICO 

grazing  land,  was  utterly  wanton  and  deprives 
Mexico  of  a  great  agricultural  development  of  the 
type  which  she  sorely  needs. 

In  industrial,  public  service,  banks  and  other 
classes  of  investment  American  money  has  been 
put  into  Mexico  to  a  total  of  about  $50,000,000. 
Most  of  the  industrial  and  public  service  corpor- 
ations are  owned  by  foreigners  in  Mexico,  the  only 
exceptions  being  a  few  manufacturing  plants  and 
undeveloped  tramway  and  city  water  plants.  The 
majority  of  this  capital  is,  however,  British, 
French  and  German,  American  money  having  gone 
into  the  other  interests  described.  Much  of  this 
industrial  property  has  been  destroyed,  and  the 
public  service  corporations  have  been  taken  over 
by  the  government  on  various  pretexts  and  with- 
out payment,  for  the  money  they  have  earned  has 
gone  into  the  Mexican  national  war  chest.  There 
remains,  however,  the  possibility  of  damage 
claims,  which  in  these  cases  can  be  easily  estab- 
lished. 

Of  the  American  corporations  engaged  in  in- 
dustries a  typical  case  is  that  of  the  Continental 
Eubber  Company,  which  has  invested  $5,000,000 
in  the  guayule  rubber  business  in  north  central 
Mexico.  In  1910  the  guayule  exports  of  Mexico 
were  28,000,000  pounds,  worth  in  the  market  ap- 
proximately $20,000,000,  and  of  this  the  Conti- 
nental exported  the  largest  share.  To-day  the 


OTJE  BILL  AGAINST  MEXICO        123 

guayule  exports  are  practically  nothing  on  the 
part  of  the  companies,  while  the  guayule  shrubs  on 
their  lands  are  being  cut  and  shipped  by  roving 
bands  of  bandits  and  peons.  The  vast  Hacienda 
de  Cedros,  covering  2,000,000  acres,  was  bought 
by  the  company  nearly  fifteen  years  ago,  when  its 
value  was  around  $1,000,000.  At  the  height  of  the 
guayule  business  its  worth  was  many  times  this 
sum,  but  to-day,  even  with  the  chances  of  a  future 
recognition  of  the  title  of  the  American  company, 
it  could  not  be  sold  for  its  original  cost.  Like  all 
foreign  properties  in  Mexico  which  have  been  suc- 
cessful, the  value  of  this  hacienda  was  in  the  in- 
dustry of  the  Americans  who  owned  and  managed 
it — a  value  which  cannot  be  estimated  or  set  down 
in  figures  in  a  damage  claim. 

The  Mexican  Banks  of  Issue,  the  backbone  of  the 
credit  system  of  Mexico,  were  owned  only  in  small 
part  by  American  interests.  Their  destruction 
and  the  wiping  out  of  the  entire  Mexican  financial 
system  which  was  built  up  by  Diaz,  must  not  be 
forgotten  in  trying  to  get  a  picture  of  the  de- 
struction wrought  by  the  Mexican  revolutionary 
bandits  and  their  governments.  The  paper  money 
systems  which  scourged  the  country  from  1913  to 
1916  cost  foreigners  millions  of  dollars  which  can 
never  be  shown  in  figures,  owing  to  the  fluctua- 
tions of  the  paper  pesos.  The  upsetting  of  credit, 
which  those  who  study  the  situation  soon  find  was 


124  TRADING  WITH  MEXICO 

due  largely  to  Carranza  decrees  (whether  justified 
by  circumstances  or  not)  has  set  Mexico  back 
nearly  fifty  years  and  has  depressed  values  of 
property  and  investment  beyond  any  calculation 
but  the  most  careful  studies  by  experts  in  finance 
as  well  as  industry. 

It  is  such  phases  of  the  Mexican  credit  system  of 
to-day  which  constitute  the  real  damage  claims 
against  Mexico — claims  which  can  hardly  be  esti- 
mated. I  place  the  figure  at  $1,000,000,000,  and 
yet  its  potentialities  are  far  more  than  that.  At 
the  present  moment  the  greatest  actual  loss — even 
though  it  can  be  partially  repaired  if  the  future 
develops  sane  government  in  Mexico — is  in  the 
virtual  destruction  of  the  market  for  property  in 
Mexico.  The  new  constitution  and  the  decrees  and 
laws  under  it  virtually  prohibit  foreigners  from 
owning  anything  in  a  vast  restricted  zone  along  the 
border  and  seacoast,  a  zone  including  the  richest 
foreign  holdings  in  Mexico.  They  prohibit  for- 
eigners from  owning  real  estate  anywhere  unless 
they  agree  never  to  appeal  to  their  home  govern- 
ments in  case  of  trouble.  The  effect  of  this  is  to 
eliminate  the  only  possible  market  for  valuable 
property.  The  Mexicans,  and  particularly  the 
Mexicans  who  are  in  control  to-day,  will  not,  need 
not,  can  not  buy  such  properties — foreigners  and 
the  opportunities  which  were  open  to  foreigners  in 


OUR  BILL  AGAINST  MEXICO        125 

Mexico  before  the  revolution  actually  created  the 
market  value  of  such  property,  because  they  and 
they  alone  were  the  possible  purchasers. 

Even  well-developed  small  farming  tracts  can- 
not be  sold  to  small  Mexican  farmers — such  small 
farmers  hardly  exist  as  a  class  and  where  they  do 
exist,  their  experience  and  their  financial  capacity 
do  not  lead  them  to  consider  the  purchase  of  im- 
proved farms.  And  above  all  is  the  promise  and 
the  performance,  in  some  cases,  of  the  much- 
heralded  land  distribution  of  the  revolutionary 
governments.  Where  men  can  get  something  for 
nothing,  or  on  their  own  worthless  credit,  they  do 
not  buy  in  the  open  market. 

Aside  from  this  destruction  of  the  values  of 
foreign  property  holdings  in  Mexico  by  making 
transfer  virtually  impossible,  there  is,  once  more, 
that  omnipresent  menace  of  confiscation  which 
makes  men  seek  privileges  instead  of  their  as  yet 
uncertain  legal  rights,  for  the  protection  of  what 
they  have.  No  longer  do  men  buy  to  develop — 
they  take,  as  in  the  oil  fields,  only  what  is  sure  to 
return  large  profits  in  a  very  brief  time,  for  they 
know  that  even  if  they  have  privilege,  and  think 
they  know  how  to  keep  on  having  privilege  for 
themselves,  they  cannot  transfer  their  capacity; 
for  getting  privilege  when  they  seek  to  sell  their 
property.  There  are  no  longer  relative  values  of 


126  TRADING  WITH  MEXICO 

property,  in  Mexico — property  is  worth  only  what 
can  be  got  out  of  it,  and  got  quickly. 

This  all  makes  up  an  uninspiring  picture.  But 
we  must  look  on  such  pictures,  must  weigh  and 
judge  them  ere  we  can  see  the  way  through  and 
beyond  them.  That  there  is  such  a  way  must  not 
be  forgotten.  It  lies  beyond  the  realm  of  mere 
political  reform,  for  to-day,  as  all  through  the 
revolutionary  history  of  Mexico  the  curse  of  the 
country  is  the  application  of  political  remedies  to 
economic  ills — that  phrase  should  be  burned  into 
the  brain  of  all  who  seek  knowledge  of  the  real 
Mexico. 

That  the  relief  is  to  come  from  the  womb  of 
revolution  has  been  the  hope  of  all  who  have 
watched  the  struggles  in  Mexico  without  under- 
standing them.  The  failure  of  their  hopes  has 
been  continuous.  Madero,  Huerta,  Carranza,  de 
la  Huerta,  Obregon, — to  each  in  turn  have  such 
watchers  transferred  their  allegiance  and  their 
faith.  Each  has  failed,  in  so  far  as  each  has  ap- 
plied only  the  political  remedy.  The  result  has 
been  the  utter  debasement  of  Mexican  credit,  the 
utter  outraging  of  Mexican  and  foreign  faith  in 
Mexico  herself.  To-day,  as  I  have  said,  Mexicans 
do  not  believe  in  Mexico,  and  each  new  failure  of 
the  political  remedy  sends  them  further  away 
from  her  altars.  What,  then,  is  the  answer? 

The  answer  is  but  the  following  of  the  inexora- 


OUE  BILL  AGAINST  MEXICO        127 

ble  logic  of  life — and  of  business.  We  shall  find 
it,  not  in  the  application  of  new  politics,  of  new 
(or  of  old)  constitutions  and  laws  and  decrees, 
not  in  the  ravings  of  dreamers  or  of  petty  states- 
men. We  shall  find  it,  and  shall  know  it  when  we 
find  it,  in  a  solution  of  the  practical  problems  of 
Mexican  commerce,  labor  and  business  by  the 
practical  men  of  affairs  of  Mexico  and  of  the 
world.  Our  part  shall  be  a  very  great  part,  for 
the  business  men  of  the  United  States,  above  all 
others,  must  show  the  way.  Mexico  must  in  the 
end  bow  to  practical  ideas  of  practical  men,  and 
in  bowing  to  that  yoke  she  will  see  her  future  un- 
fold. Of  the  ways  of  finding  the  road  and  of  turn- 
ing Mexico  upon  it,  we  shall  deal  later.  Only  here, 
at  the  end  of  this  dismal  chapter  of  failure  to  solve 
the  economic  problems  by  political  nostrums,  I 
wish  to  indicate  that  there  is,  and  will  be,  a  way 
of  hope  and  of  salvation — from  within  Mexico 
herself. 


CHAPTER  VI 

MEXICO   AND  HER   "  BOLSHEVISM " 

years  ago  Mexico  was  one  of  the  great,  pro- 
gressive nations  of  the  world;  to-day  she  is  just 
"another  Latin  American  Republic."  Then  she 
showed  literally  the  achievement  and  the  promise 
of  Japan;  to-day  she  is  as  backward  and  as  hope- 
less as  Turkey.  Ten  years  ago  her  diplomats 
were  honored  in  the  councils  of  kings,  her  credit 
ranked  with  that  of  the  best  of  Europe,  her  cities 
were  miniatures  of  Taris,  her  mines  operated  with 
the  perfection  of  those  in  England,  her  railways 
and  budding  industries  bore  comparison  with 
those  of  the  United  States,  her  people  lived  in 
arcadian  peace,  wakening  slowly  and  surely,  if 
sometimes  painfully,  to  a  civilization  which  was 
meeting  their  needs.  \x  To-day,  Mexico  is  a  little 
worse  than  Turkey,  a  little  better  than  Hayti,  her 
diplomats  are  as  inconsequential  as  those  of 
Thibet,  her  credit  is  as  low  as  that  of  Austria, 
her  cities  and  ports  are  mud  puddles  and  pest 
holes,  her  mines  are  back  to  the  rat-hole  workings 
of  the  colonial  Spaniards  and  Indians,  her  rail- 
roads are  rattling  skeletons,  her  industries  virtu- 
ally non-existent.  ^Lif  e  is  again  arcadian,  with  all 

128 


MEXICO'S  "BOLSHEVISM"          129 

those  discomforts  of  Arcadia  which  the  poets  of 
old  arid  the  propagandists  of  to-day  neglect,  so 
carefully,  to  mention. 

The  world  has  learned,  in  these  past  years,  to 
take  colossal  destructions  calmly,  so  that  few  of 
us  wonder  and  none  of  us  really  questions  the  fact 
or  the  why  of  Mexico's  sudden  and  astounding 
degeneration.  And  yet  that  failure  is  in  miniature 
the  threat  and  the  promise  of  the  failure  of  our 
civilization,  in  epitome  the  boast  of  bolshevism 
and  the  nightmare  of  capitalism.  Mexico  is  like 
the  Chamber  of  Horrors  at  the  old  Eden  Musee 
or  Mme.  Tussaud's,  a  row  of  illuminated  pictures 
which  tell  in  ghastly  realism  what  is  sure  to  hap- 
pen to  careless  people  if  they  play  too  recklessly 
with  the  world  which  is  given  them  to  use. 

This  seems  indeed  a  cycle  of  bolshevism,  but  it 
is  a  cycle  in  which  radicalism,  like  capitalism,  is 
a  sorry  victim.  As  a  picture  the  events  in  Mexico 
approximate  the  drama  in  Eussia,  carried  to  the 
logical  conclusions  which  such  a  drama  would 
reach  on  any  national  stage  where  personal  ag- 
grandizement is  a  mightier  lodestone  than  public 
devotion.  The  historical  facts  of  the  past  decade 
in  Mexico  are  unrelated  to  the  facts  and  back- 
ground of  Russia,  yet  in  Mexico  there  have  been 
heard  the  same  shibboleths,  the  same  promises, 
the  same  cries  of  the  downtrodden.  There  have 
been  seen  the  same  red  flags,  the  same  uprisings 


130  TRADING  WITH  MEXICO 

and  assassinations,  and  the  same  "redistribution" 
of  property  as  in  Russia.  And  more  than  all  has 
unrolled  the  drama  of  the  rising  of  obscure  chief- 
tains and  politicians  to  colossal  and  wicked  power* 
But  in  Mexico  the  cycle  has  gone  far  beyond 
Russia,  perhaps  because  here  there  has,  indeed, 
been  no  touch  of  even  such  idealism  as  there  may 
be  in  Moscow. 

In  Mexico  the  crimson  day  of  bolshevism  has 
been  followed  quickly  by  the  purple  twilight  of  the 
aftermath  of  graft  and  privilege.  To-day  there 
Is  to  be  seen  there  a  power  of  wealth  mightier 
than  any  which  is  conceivable  in  the  now  almost 
forgotten  dawn  of  bolshevism 's  red  day  in  Mex- 
ico. Privilege  and  not  the  proletariat,  capitalism 
and  not  socialism,  are  the  gods  of  that  stricken 
land, — a  land  which  ten  years  ago  was  mistress 
of  her  life  and  of  her  destiny,  and  to-day  is  a 
beggar  in  the  marts  of  the  world,  ready  to  sell 
her  body  and  her  soul  for  gold. 

I  have  no  desire  to  force  a  parallel  between  the 
early  events  in  Mexico  and  those  in  Russia.  The 
parallel  is  there,  and  could  fill  the  eye  and  mind 
with  the  aid  of  a  modicum  of  imagination.  But 
the  facts  alone  are  eloquent,  and  the  primary  fact 
is  not  whether  the  revolution  against  the  czar  was 
day  for  day  and  hour  for  hour  a  repetition  of  the 
Madero  revolution  against  Diaz,  or  whether 
Huerta  was  an  Indian  Denekin,  or  Carranza  a 


MEXICO'S  "BOLSHEVISM"          131 

weak  Lenin  or  Obregon  the  realization  of  what 
Trotzky  might  be  to-morrow  or  next  year.  The 
first  fact  and  the  last  is  that  in  one  great  section 
of  Mexico  we  have  seen  and  in  the  whole  of  Mex- 
ico we  are  to-day  watching  the  rolling  on  of  an 
ugly  spiral  from  plutocracy  to  revolution,  from 
revolution  to  socialism,  from  socialism  to  bolshe- 
vism  and  then  from  bolshevism  to  demagogy,  to  a 
later  and  darker  dictatorship,  with  a  more  misera- 
ble proletariat,  and  on  into  the  vast  sweep  of  an 
age  of  privilege  which  holds  and  wields  power 
greater  than  government,  greater  and  more  direct 
than  capital  or  labor  has  ever  wielded.  For  privi- 
lege stands  alone  in  the  midst  of  the  smoking  ruins 
of  what  was  once  the  Mexican  nation. 

He  braves  much  in  this  day  who  dares  define  or 
limit  bolshevism,  but  in  Mexico  its  manifestations 
have  been  carried  to  a  point  where  they  have  lim- 
ited and  defined  themselves.  First,  Mexican  bol- 
shevism was  and  is  the  application  of  political 
remedies  to  economic  ills ;  second,  it  is  the  raising 
up  of  the  proletariat  by  promises  and  agitation  to 
the  overturning  of  established  government  and  the 
setting  up,  not  of  the  promised  millennium,  but 
of  new  dictatorships  and  new  oppressions.  Both 
sought,  and  claim,  the  improvement  of  the  work- 
ers, but  both  have  failed  and  faded  to  shadowy 
appearance  and  raucous  boast. 

In  Mexico  to-day  there  are  spots  where  peace 


132  TRADING  WITH  MEXICO 

and  progress  reign — but  they  are  literally  those 
spots  where  "  capitalism, "  entrenched  behind  a 
wall  of  gold  and  foreign  protection,  has  been  able 
to  give  its  workers  the  value  of  the  profits  which 
they  gain.  The  rest  of  Mexico  is  worse  off,  po- 
litically and  economically,  than  in  the  days  of 
Diaz,  and  increasingly  the  only  hope  of  the  coun- 
try seems,  by  some  means,  to  achieve  the  extension 
of  sane  business  to  the  replacement  of  the  eco- 
nomic ruin  of  native  demagogues  masquerading 
behind  the  fair  words  of  socialism. 

The  essence  of  the  beneficent  effects  of  this  for- 
eign business  has  been  the  education  of  the  Mex- 
icans whom  it  touches  toward  broader  horizons  of 
living  and  personal  efficiency.  For  actually  the 
history  of  Mexico's  downfall  is  a  history  of  the 
failure  of  her  education,  of  the  failure  of  the  past 
governments  of  Mexico  to  utilize  the  forces  which 
were  at  their  hand  for  the  uplift  and  the  develop- 
ment of  the  unhappy  masses  of  the  people.  That 
failure  of  the  past  has  become  a  colossal  catas- 
trophe in  the  days  of  present  and  past  revolution. 

For  their  day  and  time,  Spain  and  the  Roman 
Catholic  church  did  much  for  Mexico.  We  do  not 
know  what  the  Church  might  have  done  if  it  had 
had  different,  more  educational  ideals,  but  we  do 
know  that,  save  for  the  work  of  the  Protestant 
missions  in  the  past  thirty  years,  hardly  any  other 
force  but  Rome  has  done  anything  for  social  im- 


MEXICO 'S  "BOLSHEVISM"          133 

provement  in  Mexico.  We  do  not  know  what 
Anglo-Saxon  educational  and  economic  leadership 
would  have  done  in  the  place  of  that  of  the  Span- 
iards and  mixed-bloods — such  comparisons  are 
necessarily  academic.  But  we  do  know  that  under 
the  Spanish  viceroys  and  under  Diaz  more  was 
done  toward  improving  the  material  welfare  and 
toward  building  the  foundations  of  material  and 
moral  prosperity  for  the  unfortunate  peons  than 
has  been  done  or  even  sincerely  attempted  in  the 
ten  years  of  revolutionary  rule  since  the  fall  of 
Diaz. 

Mexico  has  been,  and  indeed  is,  what  we  some- 
times call  in  our  brusque  Americanism,  a  "white 
man's  country. "  It  is  essentially  one  of  the  spots 
in  this  world  where  the  burden  of  uplift  is  the 
white  man's  burden.  For  300  years  white  Span- 
iards sought  to  lift  it,  and  in  that  long  effort,  with 
all  its  failures,  they  placed  Mexico,  even  with  her 
six  millions  of  unlettered,  superstitious  Indians, 
in  the  category  of  the  white  lands.  The  duty  of 
the  white  man,  imperialist  or  socialist  as  he  may 
be,  has  ever  been  two-fold,  and  its  duality  has 
been  its  power ;  we  have  lifted  the  material  plane 
of  our  wards  and  we  have  upraised  those  wards 
themselves  to  a  higher  and  yet  higher  mental  and 
spiritual  plane. 

It  is  this  dual  duty  that  the  revolutionists  of 
Mexico  have  shirked  and  have  scouted.  The  eco- 


134  TRADING  WITH  MEXICO 

nomic  rain  of  the  country  is  to-day  almost  com- 
plete, and  its  spiritual  uplift  has  been  halted  as 
by  a  wall  of  flame.  From  those  material  ruins, 
Mexico  might  conceivably  rise  in  a  spiritual  re- 
birth, but  the  fact  has  been  otherwise,  for  the 
material  ruin  has  been  accomplished  by  the  pros- 
titution of  all  the  ideals,  all  the  sacred  faiths  of 
men,  concentrated  by  self-seeking  bandit  govern- 
ments to  the  aggrandizement  and  the  enrichment 
of  a  few  sodden  favorites. 

I  would,  if  I  could,  paint  a  different  picture,  but 
the  half  lights  of  such  a  panorama  can  be  added 
only  after  the  dull  background  has  been  set  in. 
And  that  background  is  dark  indeed.  The  pano- 
rama of  misery  begins  when  one  crosses  the  north- 
ern border  to-day.  There  the  scattered  but  once 
almost  happy  villages  of  other  times  have  been 
replaced  by  ruined,  roofless  railway  stations  lined 
with  starving  vendors  of  food  who  fight  with  the 
bony  dogs  for  the  refuse  of  the  very  food  they 
sell.  All  the  long  trip  to  Mexico  City  is  marked 
by  the  same  voiceless  suffering,  and  the  capital 
itself  has  a  dismal  dinginess  that  cries  of  hopeless 
misery,  in  appalling  contrast  to  the  gallant  days 
of  the  Diaz  " materialism." 

The  unhappy  toll  of  war  and  revolution,  one 
says?  Yes,  in  part,  for  such  "war"  as  Mexico 
has  known  always  takes  that  toll  and  always,  too, 
from  the  weaklings,  putting  starvation  and  sick- 


MEXICO'S  " BOLSHEVISM"          135 

ness  and  filth  and  dismay  where  once  were  comfort 
and  health  and  some  cleanliness  and  happiness. 

But,  again  the  question,  was  it  not  worth  the 
price,  will  it  not  be  worth  the  price,  in  the  victories 
won  for  human  freedom?  And  here  the  answer  is 
unequivocably  "No." 

Many  hoped,  with  the  fine  faith  of  their  own 
sincerity,  that  the  upheaval  which  followed  Diaz 
was  the  dawning  of  a  new  era.  But  in  that  hope 
even  those  who  knew  Mexico  forgot  the  Mexicans 
and  their  history.  Political  independence  from 
Spain  had  been  won,  freedom  from  the  domination 
of  religious  bigotry  had  been  won,  before  Diaz 
came.  The  struggle  of  his  day  was  one  of  uplift, 
carried  on  with  faulty  tools,  perhaps,  but  slowly 
reaching  toward  the  light.  Living  was  improving, 
slowly ;  religion  was  improving,  slowly ;  education 
was  advancing,  slowly.  Then  came  a  period  of 
crystallization;  the  Diaz  oligarchy  grew  old. 
Many  sincere  men,  inside  and  outside  Mexico, 
thought  that  the  advance  could  and  should  move 
more  rapidly.  Diaz  repressed  those  hastening  re- 
formers, and  the  spiritual  force  which  finally 
broke  forth  into  the  Madero  revolution  of  1910-11 
was  undoubtedly  the  result  of  that  repression  of 
progressive  thought. 

Like  all  the  revolutions  of  Mexico's  stormy  his- 
tory, this  one  began  with  a  beautiful  stating  of 
ideals  and  of  the  unrealized  needs  of  the  common 


136  TRADING  WITH  MEXICO 

man;  but  as  with  all  those  other  revolutions,  the 
power  passed  quickly  to  the  hands  of  men  whose 
sole  " ideal77  was  personal  aggrandizement,  per- 
sonal wealth,  and  ruin  to  all  whose  needs  might 
incommode  these  exalted  "  leaders. " 

The  so-called  "social  revolution77  of  Mexico 
borrowed  the  battle  cries  of  European  socialism, 
but  in  the  land  in  which  it  worked  it  stirred  up 
only  a  tempest  in  a  teapot,  with  the  miserable 
masses  of  the  country  serving  as  tinder  and  fuel 
beneath  the  vessel.  The  teapot  is  the  diminutive 
organized  labor  world  of  Mexico,  and  that  is  boil- 
ing more  violently,  perhaps,  than  elsewhere.  But 
to-day  the  "advanced77  ideas  of  Mexico  serve,  in 
the  name  of  socialism,  only  to  put  sweeping  power 
into  the  hands  of  unscrupulous  men,  men  who 
know  and  care  nothing  of  the  responsibilities  of 
power,  and  are  using  it  only  to  the  destruction  of 
the  very  bases  of  Mexican  society. 

Thus,  while  there  seems  to  be  a  light  dawning 
in  the  labor  world  of  Mexico,  I  am  not  sure  that 
the  light  does  not  come  from  the  burning  of  some- 
thing which  Mexico  cannot  afford  to  lose.  In  that 
organized  labor  world  there  are  fewer  than 
50,000  workers  out  of  a  population  of  15,000,000, 
while  there  are  more  than  3,000,000  peons,  heads 
of  families,  who  work,  when  there  is  work,  in  the 
fields,  or  as  common  laborers.  It  is  upon  the  con- 
tinued, unbroken  suffering  of  these  3,000,000  that 


MEXICO'S  "BOLSHEVISM"          137 

the  50,000  profit  to-day — the  peons  have  but 
changed  masters  once  again  and  in  the  name  of 
freedom,  now,  serve  a  vaster  company.  The 
Mexican  leaders,  drawing  their  power  in  turn 
from  the  coherent,  organized  industrial  workers, 
are  to-day  destroying  the  civilization  of  Diaz,  and 
with  it  the  civilization  of  American  business  men, 
American  teachers  and  American  missionaries, 
which  was  and  is  the  hope  of  the  downtrodden  ma- 
jority. The  "modern"  laws  which  labor  has  pro- 
mulgated might,  we  may  conceive,  fit  the  advanced 
industrial  life  of  Germany  or  the  United  States, 
but  they  are  utterly  suicidal  to  Mexico.  The  new 
Constitution  of  1917  has  written  into  its  fabric 
an  idealistic  set  of  labor  laws,  beautiful  in  termi- 
nology but  under  present  conditions  of  industry 
and  psychology  and  government  in  Mexico,  about 
as  impractical  for  the  development  of  industry 
and  the  true  welfare  of  labor  as  they  are  efficient 
as  a  means  of  graft  and  extortion  against  labor 
as  well  as  against  employers.  These  laws  are 
worked  out  for  the  sole  benefit  of  the  industrial 
workers  of  Mexico,  that  total  of  less  than  50,000 
as  against  the  3,000,000  farm  and  day  laborers. 
They  are  thus  far  more  important  as  a  propa- 
ganda document  with  the  foreign  radicals  who 
caused  the  inclusion  of  those  administrative  laws 
in  the  new  national  constitution  than  they  are 
helpful  to  Mexico's  own  social  advancement. 


138  TRADING  WITH  MEXICO 

The  eight-hour  day  provided  in  the  constitution, 
the  welfare  projects  such  as  the  stern  proviso 
that  nursing  mothers  shall  have  two  half-hour 
periods  per  day  in  which  to  care  for  their  chil- 
dren, the  constitutional  support  of  the  right  to 
strike  even  in  public  utilities,  and  the  virtual 
provision  against  the  employment  of  strikebreak- 
ers, or  the  closing  of  a  shop  in  a  lock-out,  are 
typical  of  the  privileges  for  labor — they  cover 
everything  which  the  most  radical  would  make  the 
laws  of  every  land.  In  Mexico,  and  under  the 
peculiar  conditions  of  Mexican  psychology  and 
inter-class  relationships,  they  become  little  more 
than  tools  of  the  demagogues.  The  rulers  do  as 
they  choose  in  any  cap-j,  as  when,  not  long  ago,  a 
railway  strike  was  successful  to  the  last  detail 
of  the  demands  made  in  the  name  of  "the  social 
revolution"  and  two  months  later  a  similar  strike 
for  similar  ends  was  opposed  by  the  general  use 
of  strikebreakers.  The  labor  courts,  theoretically 
a  great  advance,  are  used  almost  without  excep- 
tion as  a  palladium  of  radical  propaganda — and 
as  a  toll-gate  on  the  road  of  privilege. 

Such  are  the  reforms  of  the  new  era.  They 
provide  six  or  eight  hour  days,  for  men  who  can- 
not read  and  whose  children  are  not  taught  to  read 
or  to  think.  They  provide  minimum  wages,  to  be 
determined  by  factory  committees,  with  the  most 
ignorant  workmen  in  the  world  on  a  par  with 


MEXICO'S  "BOLSHEVISM"          139 

employers  and  industrial  engineers.  They  pro- 
vide against  discharge  for  any  cause  except  proven 
drunkenness,  in  a  land  where,  to  say  the  least, 
drunkenness  is  relative. 

Their  own  people  have  begun,  a  little,  to  wonder 
at  the  wisdom  of  these  sweeping  changes,  and  one, 
Ing.  Carlos  Arroyo,  not  long  ago  wrote  in  the  of- 
ficial but  very  radical  "Bulletin  of  Industry,  Com- 
merce and  Labor"  that  there  were  four  main  dif- 
ficulties which  would  have  to  be  corrected  before 
factory  efficiency  could  be  arranged  in  Mexico  on 
a  cooperative  basis :  first,  scientific  method  would 
have  to  replace  the  empirical  system  now  in  use; 
second,  there  would  have  to  be  special  training  for 
apprentices;  third,  there  would  have  to  be  study 
of  employees  to  have  them  properly  placed; 
fourth,  the  responsibility  for  the  tasks  assigned 
would  have  to  be  "equally"  divided  (not  given 
entirely  to  the  workers)  between  the  management 
and  the  workers,  "because  the  former  continues  to 
be  charged  with  the  responsibility  for  the  compe- 
tence of  the  latter." 

And  as  to  that  competence,  this  same  bulletin 
regularly  publishes  the  records  of  accidents. 
There  one  will  find  that  in  1918,  for  instance,  there 
were,  in  278  industrial  establishments  having 
292,364  employees,  6,424  accidents,  in  which  184 
were  killed,  and  42  maimed  and  6,198  wounded. 
And,  most  illuminating  of  all,  5,165  of  the  acci- 


140  TRADING  WITH  MEXICO 

dents  were  admittedly  due  to  the  "carelessness  of 
workmen, ' '  only  195  were  the  fault  of  the  manage- 
ment and  1,064  were  due  to  unavoidable  causes. 

As  to  the  value  of  the  achieved  reforms,  I  have 
but  this  to  tell:  In  all  the  cities,  in  the  centers  of 
industry  like  the  Tampico  oil  fields  and  the  busy 
port  of  Vera  Cruz  (busier  to-day  than  it  has  ever 
been  because  all  Mexico  must  live  on  imported 
goods)  I  found  a  sullen  hatred  of  the  foreigner,  an 
ugly  self-assertion  that  bodes  but  ill  for  those  mis- 
sionaries of  religion  and  of  business  to  whom  we 
look  for  so  much  of  the  future  regeneration  of  the 
country.  I  saw  none  of  the  contented,  happy  calm 
of  prosperous  laborers,  but  only  the  unrest  of  the 
great  cities  of  other  lands,  ugly  with  resentment, 
fertile  field  for  revolution  but  not  for  progress. 
And  yet  those  very  resentful  workers,  convinced 
of  an  unappreciated  importance  which  they  knew 
but  by  rote,  are  all  that  there  is  of  the  "fruits"  of 
the  "social  revolution"  in  Mexico. 

No,  Mexico  has  not  changed,  even  amongst  her 
petted  laboring  classes,  and  I  fear  that  the  old 
rule  of  our  ancient  civilization  will  have  to  persist 
a  little  longer,  and  the  long,  dim  road  be  trod 
again  through  failure  and  reform,  and  failure 
again  and  yet  again.  I  fear  that  we  shall  still 
»have  to  lift  by  reaching  down  and,  by  training  the 
dull  forces  of  those  dull  minds,  teach  them  to  help 
themselves  and  to  climb  by  themselves. 


MEXICO'S  "BOLSHEVISM"          141 

Out  on  the  plantations  the  workers  are  going 
the  rounds  which  they  have  covere'd  since  Mexico 
began,  and  in  the  fairs  I  saw  the  only  evidence  of 
happiness  which  smile  on  one  in  the  length  and 
breadth  of  the  country.  The  market  places  and 
the  fairs  of  Mexico,  sunny,  crowded,  colorful,  rich 
because  the  Indians  in  the  booths  are  close  to 
Nature  and  Nature's  bounty!  That  simple  hap- 
piness has  been  the  source  of  all  Mexico's  joy — 
and  of  all  her  misfortune.  That  simplicity  has 
made  her  people  the  dupes  of  predatory  chieftains, 
and  hideous  priests  of  pre-Spanish  times,  of  Span- 
iard and  priest  through  the  long  centuries  of  the 
viceroys,  of  master  and  of  some  priests,  too, 
through  the  years  since  the  Independence.  Yet  in 
those  periods  those  who  have  duped  the  Indians 
have,  most  of  them,  protected  the  Indians  in  an 
easy,  medieval  way,  and  slowly  there  has  grown 
a  civilization,  and  in  that  civilization  have  been 
nurtured  the  seeds  of  better  things. 

The  time  was  coming  for  those  seeds  to  bear 
fruit,  when,  hastening  the  ripening,  came  the 
revolutions  of  1910  and  after.  It  was  like  the 
child  who  pulled  up  the  stalks  to  see  how  the  seeds 
were  growing — they  were  growing  much  faster 
than  appeared  on  the  surface,  but  they  did  not 
grow  after  they  were  pulled  up. 

Looking  back  to  the  Diaz  day  we  can  find,  for 
instance,  the  slow,  constructive  work  toward  the 


142  TRADING  WITH  MEXICO 

creation  of  arable  land  for  small  farms.  It  was 
being  hampered  somewhat  by  grasping  officehold- 
ers, but  it  was  advancing,  a  great  national  plan 
of  irrigation  to  make  possible  the  use  of  small 
tracts  in  a  country  where  rain  conditions  have  for- 
ever made  small  farming  all  but  impossible.  Then 
the  revolution  and  the  resounding  cry  for  "land." 
The  alleged  land  hunger  of  the  Mexican  Indians 
and  peons  has  been  at  once  the  rallying  cry  for 
each  succeeding  revolution  and  the  one  appeal  of 
all  of  them  for  foreign  sympathy. 

But  whatever  authorities  may  conceive  as  to  the 
facts  of  the  existence  of  this  land  hunger  or  of  the 
forms  which  it  takes — a  desire  for  little  farms, 
for  prehistoric  communal  ownership,  or  for  prop- 
ety  only  because  it  is  wealth  and  can  be  con- 
verted into  cash — it  is  also  true  that  the  schemes 
of  the  revolutionists  for  land  distribution  have 
been  impossible  except  by  the  confiscation  of  rich 
properties  and  the  destruction  of  vested  rights. 
Obviously,  no  land  which  is  not  tillable  is  satis- 
factory for  distribution,  and  the  tillable  land  of 
Mexico  is,  as  I  have  pointed  out,  actually  only 
about  25,000,000  acres,  or  one-twentieth  of  the 
area  of  the  country.  Land  distribution  must  long 
remain  largely  a  beautiful  theory,  good  only  for 
raising  up  the  natives  by  direct  appeal  to  their 
bitter  poverty  or  to  their  human  greed,  and  for 


MEXICO'S  "BOLSHEVISM"          143 

the  raising  up  of  foreign  sympathy  by  the  flaunt- 
ing of  the  misfortunes  of  the  soil  under  more  ap- 
pealing names. 

In  Mexico  to-day  all  these  dreams  of  land  dis- 
tribution have  gone  the  way  of  other  "reforms" 
for  the  benefit  of  the  peons.  Nothing,  virtually, 
has  been  done.  Some  great  properties  have  been 
confiscated,  or  "paid  for"  in  unguaranteed  bonds 
of  bankrupt  state  governments,  but  most  of  such 
properties  are  to-day  in  the  hands  of  former  revo- 
lutionary "generals."  Some  few  have  been  dis- 
tributed to  Indians,  but  even  these  tracts  are  taken 
with  but  scant  enthusiasm.  One  great  "land  dis- 
tribution" in  Yucatan  called  forth  a  crowd  of 
6,000  to  the  festival  (all  Mexico  goes  to  any  fiesta) 
but  only  thirty  Indians  took  up  any  of  the  hun- 
dreds of  small  tracts  offered. 

The  essential  facts  of  the  Mexican  situation  are 
patent  to  all  who  go  to  Mexico  to-day,  and  they 
are  inescapable  to  those  who  have  a  background  of 
knowledge  of  Mexico  by  which  to  judge  of  what 
they  see.  And  yet-  it  is  true  that  in  the  councils 
of  Carranza,  in  the  entourages  of  de  la  Huerta  and 
of  Obregon  there  have  been  men  representing1 
forces  which  we  in  our  time  have  felt  could  not 
be  used  to  evil  purpose.  These  were  men  who 
had  been  stirred  by  the  fine  frenzy  of  the  first 
revolution,  and  whose  ideas,  caught  as  mere 


144  TRADING  WITH  MEXICO 

phrases  by  the  leaders  of  revolts,  were  handed 
back  to  their  originators  again,  as  the  1 1  ideals ' '  of 
the  revolution.  Strange  indeed  it  is,  and  yet  not 
only  newcomers,  but  foreigners  of  long  residence 
and  sincere  and  devoted  Mexicans  as  well,  fell 
victims  to  that  subtle  flattery.  In  business,  in  edu- 
cation, in  the  churches,  there  were  such  men, 
their  very  hopes  too  great  to  protect  them  from 
the  petty  deceits  of  those  who  climbed  to  power 
upon  them. 

I  think  I  can  understand  why  travelers  in  Mex- 
ico, sincere  students  as  well  as  moistily  enter- 
tained excursions  of  American  "  Chambers  of 
Commerce"  can  be  deceived  as  to  conditions  there. 
I  have  been  inclined  to  be  impatient  with  those 
who  let  themselves  be  led  this  way  and  that,  and 
flattered  by  the  apparent  sincerity  of  self-deluding 
Mexican  officials,  but  Mexico  is,  after  all,  an  eter- 
nal enigma.  It  is  an  enigma  because  its  colossal 
depths  of  ignorance  and  the  smalmess  of  its  de- 
ceits are  literally  incomprehensible  to  simpler  and 
less  subtle  minds. 

It  is  that  enigma  which  I  have  sought  through 
all  my  writing  on  Mexico  to  resolve.  On  my  last 
trip  through  the  country,  I  saw  just  the  eternal 
Mexico,  the  Mexico  of  ignorance  and  misery, 
whose  only  change  was  that  it  was  a  little  sadder, 
a  little  more  resentful  of  those  whom  it  once  re- 
garded as  its  helpers  and  its  friends,  a  little  more 


MEXICO >S  "BOLSHEVISM"          145 

pompous  in  parading  its  borrowed  intellectual 
plumage. 

A  most  perfect  example  of  this  ability  of  the 
Mexican  of  the  "modern"  type  to  absorb  one's 
ideas  and  deceive  one  by  the  redishing  of  those 
ideas,  happened  to  me  on  my  last  trip  to  Mexico 
City.  In  the  course  of  the  preparation  of  an  arti- 
cle on  a  great  business  for  a  popular  magazine,  I 
met  a  Mexican  licenciado  (a  title  of  vast  elegance, 
meaning  much  more  than  its  dictionary  equiva- 
lent of  "lawyer")  who  was  extremely  anxious  to 
be  quoted  as  an  expert  on  the  subject  which  I  was 
studying.  He  evidently  thought  that  jny  quoting 
him  would  help  him  to  a  government  post  to  which 
he  aspired,  so  he  expounded  his  ideas  at  great 
length.  When  he  was  finished,  I  answered  his  ar- 
guments in  kind,  and  with  considerable  interest 
in  his  response  to  my  counter-play.  He  was  pleas- 
antly combative,  and  we  parted  in  thorough 
friendship, 

It  was  only  a  few  hours  later  that  I  had  an  ur- 
gent call  from  this  same  gentleman,  who  had,  he 
told  me,  been  going  into  new  material  on  the  sub- 
ject, and  wished  to  express  his  views,  stated  in 
the  morning,  more  definitely  to  me.  Whereupon 
he  returned  me,  recooked  and  eloquently  served, 
my  own  friendly  contentions  of  the  previous  in- 
terview. It  was  a  bit  thick  for  me,  but  it  is  worth 
the  telling  that  an  American  business  man  of  long 


146  TRADING  WITH  MEXICO 

experience  in  Mexico  who  had  introduced  this  gen- 
tleman to  me  remarked  when  the  subject  came  up 
again,  a  day  or  two  later : 

"By  the  way,  Licenciado  Blank  is  getting  much 
broader.  He  has  figured  out  a  pretty  decent  atti- 
tude on  this  problem  .  .  . ' '  and  he  redished  me  my 
own  views  again ! 

This  is  Mexico  to-day.  On  the  top  a  group  of 
men  who  have  absorbed  in  just  this  way  the 
phrases  of  the  intelligent  radicals  of  the  world  but 
who  still  remain,  as  always,  sycophants  without 
background  of  education,  or  even  genuine  radical 
convictions.  Below  them  the  vast  misery  of  the 
unthinking  serfs  of  the  country,  duller,  certainly 
sadder  and  even  less  vfell  nourished  than  in  the 
days  of  the  viceroys  and  of  Diaz. 

We  are  all  responsible  for  the  Mexico  which  is 
before  us.  We  Americans  of  every  type  in  that 
old  Mexico  were  too  willing  to  let  the  misery  of 
Mexico  be  what  it  was,  were  too  willing  to  take  our 
helpers  and  our  support  from  the  middle  classes 
which  were  emerging  so  slowly.  We  made  a  fetish 
of  that  middle  class,  built  our  hope  of  Mexico  upon 
it,  called  it  the  crowning  achievement  of  the  age 
of  Diaz,  and  from  it  came  the  beginnings  of  that 
group  of  Mexican  leaders  of  which  we  all  had 
dreamed.  We  saw  Diaz  clear — all  of  us,  I  think-^ 
and  knew  that  his  day  could  not  be  forever.  But 


MEXICO'S  "BOLSHEVISM"          147 

we  had  faith  in  that  middle  class,  forgetting,  as  it 
was  easy  to  forget,  the  instability  of  that  founda- 
tion of  Indian  poverty  and  misery.  We  were  go- 
ing to  transmute  those  shifting  sands  by  making 
more  striking  the  examples  of  its  brothers — 
artisans  and  clerks  and  students  and  teachers. 
We  trusted  so  blindly,  then,  in  the  leaven  of  ex- 
ample— we  knew  so  little  of  the  sodden  flour  which 
made  our  loaves. 

And  then  came  the  day  of  revolution,  Madero 
the  deliverer.  There  were  few  of  us  who  regretted 
the  passing  of  Diaz,  save  sentimentally,  that  it 
should  have  to  be  in  just  that  way — we  had  hoped 
he  would  die  gloriously,  beloved  by  the  people  for 
whom  he  had  given  so  much.  And  then  the  dis- 
appointment and  the  horror  of  that  wild  cabal  of 
graft  and  loot  under  Madero,  when  the  dreamers, 
the  repressed  brains  of  a  generation,  stood  wait- 
ing, wringing  their  hands  in  helpless  impotence — 
those  who  could,  truly,  have  done  so  much!  It 
was  pitiful,  as  was  the  aftermath  of  Huerta,  the 
reaction,  the  impossible  reaction  with  its  ugly 
tinge  of  a  coming  uprush  of  Indian  barbarism. 

Then  Carranza,  riding  upon  the  winged  horse  of 
Madero — it  seems  that  not  all  of  us  understood, 
quite,  for  we  heard  the  fair  words,  as  we  have 
heard  them  echoing  through  empty  halls  and 
across  dead  and  tortured  bodies  these  five  years 


148  TRADING  WITH  MEXICO 

since.  Many  sincere  men  were  caught  by  those 
fair,  echoing  words,  and  many  followed  the  phan- 
tom to  the  end.  And  many  continue  to  this  day. 

I  have  no  need  to  talk  of  the  recent  past,  nor  of 
the  present.  The  story  is  written  in  the  starving 
babies  of  the  Mexican  towns,  in  the  dismal  rail- 
way stations  where  wretched  food  can  be  bought 
(if  one  dares)  from  the  very  mouths  of  hungry, 
filthy  vendors.  Misery  and  grief  and  pain  stalk  in 
Mexico  to-day.  Somewhere  those  who  have  used 
these  wretched  bodies,  as  infinite  in  number,  as 
minute  in  importance,  as  the  skeletons  of  a  coral 
reef,  for  climbing  to  wealth  and  power — some- 
where these  must  make  answer. 

In  another  chapter  I  Lhall  tell  something  of  the 
story  of  Yucatan,  where  the  ideas  of  radical  so- 
cialism were  accepted  and  then  used  to  destroy 
even  itself.  It  is  a  story  of  horror  and  of  wreck- 
age, the  clearest  picture  of  Mexican  conditions  at 
their  ultimate  which  has  passed  in  the  gory  pano- 
rama of  the  recent  years. 

What  has  happened  in  Yucatan  is  in  essence 
what  has  been  going  on  all  over  Mexico.  In  the 
larger  field  of  the  whole  country,  the  revolution- 
ists have  been  more  coherent,  and  at  the  same  time 
in  their  utterances  somewhat  more  considerate  of 
the  prejudices  of  the  world  at  large.  Yucatan, 
isolated  from  the  rest  of  Mexico,  and  free  from 
the  prying  eyes  of  most  of  the  world  as  well,  has 


MEXICO'S  " BOLSHEVISM"          149 

gone  on  with  the  round  of  despotism  and  oppres- 
sion, rape  and  murder  in  the  name  of  socialism, 
but  on  the  mainland,  the  "  rights  of  labor "  have 
been  more  elaborately  defended  (in  words)  and 
the  legal  systems  of  confiscation  and  anti-for- 
eignism  have  been  more  logically  developed,  under 
the  standard  of  progressive  socialism! 

The  years  have  written  records  of  Mexican 
political  and  social  revolution  which  are  identi- 
cal with  those  of  the  present  in  all  save  their 
battlecries.  The  first  outbreak  against  Spain 
in  1810  and  the  dozens  of  revolutions  which 
followed  it  were  a  reductio  ad  absurdum  of 
the  political  ideals  of  Thomas  Paine  and  the 
American  and  French  revolutionaries.  The  Con- 
stitution of  1857,  under  which  Diaz  ruled,  was 
little  more  than  a  copy  of  the  Constitution  of  the 
United  States,  and  few  of  its  provisions  were 
really  adapted  to  Mexico's  peculiar  conditions. 
'So  it  is  not  strange,  perhaps,  that  the  Constitution 
of  1917  is  as  far  from  being  Mexican  and  far  more 
false  an  effort  to  solve  the  nation's  problems  than 
was  its  predecessor,  for  it  was  dictated  by  foreign 
radicals  and  merely  adapted  by  the  Mexican  poli- 
ticians who  knew  best  what  would  arouse  enthu- 
siasm in  the  Mexican  crowd. 

Despite  its  beauties  of  theory  and  its  direct  ap- 
peal to  the  serious  radical  thought  of  the  world, 
its  most  useful  function  is  becoming  obvious  even 


150  TRADING  WITH  MEXICO 

to  the  most  credulous,  for  it  gives  the  governing 
groups  that  control  of  Mexican  life  by  which  it  is 
possible  for  them  to  sell  the  privilege  of  doing 
business,  because  the  ancient  rights  of  business 
are  utterly  done  away  with.  The  ills  of  Mexico 
are  essentially  economic,  and  the  new  constitution 
and  its  revolutions,  even  more  than  their  prede- 
cessors, have  sought  to  apply  only  the  political 
remedy,  a  remedy  which  has  so  far  served  only 
to  destroy  the  efficiency  of  the  economic  machinery 
of  the  country  and  place  it  upon  the  auction-block 
of  graft. 

To-day  all  over  Mexico,  labor  is  paid  higher 
wages  than  it  ever  received,  but  it  is  paying  more 
for  its  food  and  shelter  3aan  it  ever  spent  before. 
The  misery  of  Mexico  is  just  as  obvious  and  as 
unescapable  as  ever  to  him  who  sees  truly.  Save 
for  those  sections  where  foreign  business  still  sur- 
vives the  Mexican  lives  as  he  has  always  lived,  on 
the  verge  of  pauperism.  And  upon  the  summit  of 
the  heap,  lounging  in  easy  magnificence,  is  the 
mixed-blood  agitator,  the  general,  the  governor, 
the  cabinet  official  who  have  battened  on  Mexico's 
misery  before  this  day  and  will  doubtless  do  so 
long  after  this  day  is  passed. 

The  raising  of  the  Indian  masses  of  Mexico  by 
promises  and  by  high-sounding  battlecries  is  a 
game  as  old  as  Mexican  history;  it  is  played  with 
unvarying  success  year  after  year  and  generation 


MEXICO'S  "BOLSHEVISM"          151 

after  generation.  The  more  extravagant  the 
promises,  the  more  complete  the  enthusiasm  of  the 
"proletariat,"  both  for  the  political  movement  of 
the  moment,  and  for  the  one  which  follows  it  im- 
mediately upon  the  discovery  by  the  unfortunate 
"people"  that  the  previous  promises  are  not  going 
to  be  kept. 

But  in  to-day's  orgy  of  revolution,  Mexico  has 
gone  further  toward  destruction  than  she  has  ever 
gone  before.  Values  throughout  native  Mexico 
are  almost  non-existent,  and  the  wheels  of  Mexi- 
can civilization  like  the  wheels  of  the  wheezy  loco- 
motives of  her  railways,  creak  and  groan  on  their 
rounds.  The  nation's  economic  life  is  tied  to- 
gether by  strings,  and  what  remains  is  only  what 
has  been  salvaged  from  her  junk-heaps,  and  like 
the  lawn-mower  borrowed  from  a  neighbor,  is  kept 
running  only  to  serve  the  purposes  of  the  bor- 
rower. 

The  seventy  years  of  warfare  before  Diaz  left 
intact  the  civilization  of  the  Spaniards  for  Diaz 
to  revive,  but  the  ten  years  from  Diaz  to  Obregon 
have  torn  that  civilization  to  shreds.  Nearly  all 
that  Diaz  built  has  disappeared,  and  to-day  the 
business  of  Mexico  is  swapping  jack-knives  and 
selling  food  and  shelter  at  the  highest  prices  the 
traffic  will  bear. 

No  man  who  would  face  truth  in  Mexico  can 
ignore  these  potent  facts.  And  the  reason  is  not 


152  TRADING  WITH  MEXICO 

revolution,  nor  even  mere  radicalism,  but  the  cyni- 
cal application  of  political  control  to  economic 
needs  for  the  aggrandizement  of  individual  leaders 
whose  power  is  in  the  market  for  all  who  will  buy 
the  privileges  which  they  have  to  offer. 

It  is  in  this  condition  that  the  importance  and 
the  menace  of  radical  Mexican  government  are 
found.  What  it  has  seemed  well  to  call  bolshe- 
vism  in  Mexico  has  its  greatest  power  in  its  mere 
threat  against  capital  and  business.  That  threat, 
the  mere  presence  of  the  anti-capitalistic  consti- 
tution and  laws,  has  probably  far  greater  power 
than  their  actual  application  would  have.  Once 
the  blow  of  confiscation  fell,  the  answer  from  the 
world  of  business  and  ci  filized  government  would 
be  quick  and  sure — Mexico  cannot  be  ignored  as 
Russia  can  be,  for  Mexico  lies  in  the  center  of  the 
trade-routes  of  the  globe,  and  we  in  the  United 
States  would  feel  the  menace  of  her  anarchy  too 
strongly  to  remain  passive. 

But  the  static  power,  the  threat  of  laws  which 
are  never  enforced — there  is  the  menace  and  there 
the  great  influence  which  creates  the  graft  and 
cynicism  of  Mexican  officials.  So  long  as  those 
laws  remain,  business,  if  it  would  survive  in 
Mexico,  must  buy  immunity.  And  it  does  buy  it, 
for  business  is  ever  timid,  and  no  single  business 
organization  and  seldom  a  group  of  business  or- 
ganizations, will  ever  go  to  the  stake  for  a  prin- 


MEXICO'S  "BOLSHEVISM"          153 

ciple.  Its  duty  to  its  stockholders  and  to  its  em- 
ployees makes  it  buy  its  way,  not  always  by  direct 
graft,  but  in  submission  to  vast  taxes,  to  unwar- 
ranted extortions,  to  the  riding  of  official  annoy- 
ances— rather  than  accept  the  shut-down  and  fight 
with  its  own  great  power,  its  inertia  of  movement 
or  of  the  silence  which  ruins  empires. 

In  recent  months  the  great  business  groups  in 
Mexico  have  opposed  a  certain  amount  of  strength 
to  the  growing  power  of  the  auction-block  of  Mex- 
ican graft  and  privilege.  The  oil  companies  have 
from  time  to  time  offered  a  solid  front  to  the  en- 
croachments of  this  marketing  of  the  privilege  of 
doing  business  in  contraversion  of  the  temporary 
laws  of  Mexico.  They  have  held  back,  apparently, 
the  crushing  fall  of  actual  enforcement  of  the  con- 
fiscatory  provisions  of  the  Constitution  of  1917, 
and  they  have,  here  and  there,  stopped  the  market- 
ing of  privilege — for  brief  periods.  But  looking 
at  the  whole  picture,  it  seems  as  if  the  Mexican 
officials  of  the  present  era  are  in  no  greater  hurry 
to  enforce  the  confiscation  than  are  the  foreigners 
to  have  it  enforced.  The  static  power  of  those 
provisions,  waiting  to  fall,  is  far  more  profitable 
to  Mexican  pockets  than  would  be  the  sudden  and 
final  crash  of  their  genuine  application.  Their  en- 
forcement would  be  of  little  value  to  the  seller  of 
privilege,  for  then  he  would  have  to  invent  another 
method  of  extortion.  No,  privilege  will  long  re- 


154  TRADING  WITH  MEXICO 

main  upon  the  market  counters  of  Mexico.  It  will 
remain  there,  in  fact,  until  some  means  is  found, 
within  or  without  Mexico,  for  destroying  the  sys- 
tem which  is  so  profitable.  That  need  of  change 
is  the  crisis  of  the  business  world  of  Mexico,  the 
crisis  of  all  who  would  do  business  with  Mexico 
in  the  present  or  in  the  future. 

What,  then,  can  save  Mexico  in  this  crisis  ?  The 
panacea  of  the  Obregon  idea  was  certainly  not  a 
solution.  Here  indeed  was  a  probably  genuine 
desire  to  solve  the  problem  in  a  final  and  glorious 
way.  But  the  tools  were  but  the  tools  of  the  old 
days  of  Carranza  and  the  rest.  That  was  a  politi-: 
cal  remedy  for  an  economic  condition,  and  its 
promise  was  a  sordid  thing,  an  unworthy 
thing  for  Mexico  or  for  the  United  States  to 
expect.  For  the  promise  of  Obregon  was  at 
first  for  reaction,  a  belief  that  Obregon  was 
comfortably  wealthy  already  or  that  his  ambi- 
tion was  for  power  alone.  Therefore  he  was 
to  be  the  great  conservative,  who  would  save 
Mexico  by  slipping  back  to  the  days  of  Diaz.  But 
reaction  must  always  fail  in  the  end.  In  this  case 
it  passed  quickly,  for  this  was  a  "reaction"  which 
was  part  and  parcel  of  the  "radicalism"  of  Car- 
ranza, its  power  but  a  manifestation  in  another 
form  of  the  same  personalism,  the  same  sale  of 
privilege,  which  made  Carranza  impossible  and  in 
ithe  end,  brought  him  to  his  ruin. 


MEXICO'S  "BOLSHEVISM"          155 

The  later1  developments  of  the  Obregon  idea 
were  marked  by  an  obvious  anxiety  to  reach  a 
permanent  solution  of  the  immediate  and  press- 
ing difficulties  of  Mexico,  and  most  of  all  to  secure 
recognition  by  the  United  States  and  financial  aid 
from  American  bankers,  as  the  sine  qua  non  of 
such  a  solution.  The  efforts  put  forth  were  power- 
ful, but  the  driving  force  back  of  them  was  pri- 
marily personal  ambition  and  the  realization  that 
only  such  a  solution  could  save  the  happy  hunting 
grounds  of  revolutionary  leaders  from  some  sort 
of  foreign  intendancy.  And  above  and  beyond 
and  behind  all,  were  the  factors  of  government 
whose  origins  and  whose  immediate  past  seem  in- 
deed to  be  as  firmly  stamped  upon  their  natures 
as  the  spots  upon  the  leopard  or  his  skin  upon 
the  Ethiopian. 

The  completed  cycle  of  the  bolshevist  experi- 
ment and  the  arrival  back  at  the  sale  of  privilege 
links  up  with  the  failure  of  Obregon  to  offer  any- 
thing but,  first,  a  promise  of  reversion  to  reaction- 
ary czarism  and,  second,  that  unconcealed  offering 
of  privileges  and  promises  of  power  to  all  who 
could  or  who  might  aid  in  the  campaign  for  recog- 
nition and  for  foreign  loans.  The  condition 
seems  to  me  to  sound  a  call  as  of  Elijah  for  a  new 
understanding  of  the  Mexican  problem.  Carran- 
cism  might  have  been  but  an  isolated  interlude, 
might  have  been  a  mere  question  of  observation 


156  TRADING  WITH  MEXICO 

and  interpretation,  if  the  end  had  not  come  and  if 
business  in  Mexico  were  not  continuing  to  pay  for 
its  sorry  privileges  in  the  same  sorry  way.  Obre- 
gon  might  perhaps  have  been  the  hope  for  peace 
and  happiness  in  Mexico  if  we  had  not  had  Car- 
ranza  and  de  la  Huerta  and  if  their  followers,  with 
their  cynical  mouthings  of  all  the  most  sacred 
faiths  of  man,  were  not  to-day  still  the  rulers  of 
Mexico,  still  the  sellers  of  privilege  in  the  name  of 
human  progress. 

We  must,  I  believe,  cast  away  the  too  long  nur- 
tured idea  that  the  battle  in  Mexico  is  between  the 
progressive  thought  of  the  day  and  the  reactionary 
conservatism  of  great  interests.  I  have  sought 
here  to  show  why  this  is  so.  A  revolution  which 
can  evolve  the  idea  of  the  socialization  of  great  in- 
dustry and  can,  in  the  very  conception  of  that  idea, 
turn  it  to  the  looting  of  that  industry  for  private 
graft  and  gain,  as  in  Yucatan ;  a  revolution  which 
can  produce  the  uncontrolled  radicalism  of  Car- 
ranza  and  evolve  through  the  cynical  play-acting 
of  de  la  Huerta  into  the  promise  of  reactionism  in 
Obregon  with  all  the  unholy  forces  which  sup- 
ported Carranza  rallying  to  uphold  his  suc- 
cessors— such  a  revolution  will  not,  unredeemed, 
carry  Mexico  into  her  next  era  of  progress  and 
peace.  Capital  and  socialism  must  alike  beware. 
Neither  should,  in  honesty  with  itself,  accept  a 
cause  in  Mexico  until  the  issue  is  joined  clear. 


MEXICO'S  "BOLSHEVISM"          157 

In  the  past  ten  years  we  have  seen  in  turn  the 
appeal  of  political  Mexico,  to-day  to  the  bolshe- 
vist,  to-morrow  to  the  Christian  missionary,  to- 
day to  the  thinking  radical  of  the  universities,  to- 
morrow to  the  deep-dyed  conservative  of  the 
counting  room.  Confusion  has  piled  upon  con- 
fusion until  we  have  each  seen  in  Mexico  what  we 
hoped  or  what  we  feared. 

We  can  only  begin  to  see  the  truth,  and  in  the 
truth  the  solution  of  the  complicated  Mexican 
problem,  when  we  clear  our  minds  of  these  old 
ideas  that  he  who  is  against  the  revolutionary 
government  in  Mexico  is  a  hopeless  reactionary, 
and  that  he  who  is  for  it  is  a  raving  bolshevist. 
For  the  Mexican  revolution  is  part  of  the  "  world 
revolution"  only  as  the  shibboleths  of  that  vast 
upheaval  have  been  turned  to  the  aggrandizement 
of  Mexican  leaders  who  know  neither  what  the 
phrases  mean  nor  where  they  lead. 

If  this  is  grasped,  and  if  we  will  look  at  Mexico 
as  a  problem  for  us  all,  then  the  beginning  of  the 
road  away  from  foreign  intervention  and  the  peril 
to  our  peace  and  Mexico 's  will  begin  to  open.  In- 
tervention can  be  avoided,  even  though  it  may  be 
grievously  close  to-day.  But  it  cannot  be  avoided 
until  we  see  clearly  that  the  issue  of  intervention, 
like  the  whole  issue  of  the  Mexican  revolution,  is 
not  one  of  capitalistic  interests  against  the  un- 
happy Mexican  peon,  but  a  struggle  of  all  the  con- 


158  TRADING  WITH  MEXICO 

structive  thinkers  and  workers  of  the  world — be 
they  radical,  socialistic,  religious,  philosophical, 
laborite,  capitalistic,  industrial  or  social,  be  they 
American,  English,  French,  Russian  or  Mexican 
— against  forces  of  greed  and  ignorance  which 
turn  every  ideal  of  honest  men  to  the  prostitution 
of  their  country  and  the  exploitation  of  their  fel- 
lows within  and  without  its  borders.: 


CHAPTER  VII 

THE  EAPE  OF  YUCATAN 

FROM  the  golden  wheat  fields  of  Kansas  to  the 
barren  sands  of  Yucatan,  from  the  loaf  of  bread 
on  your  table  to  the  loot  of  Mexican  revolutions — 
these  seem  mighty  leaps  of  imagination  or  of  fic- 
tion. Yet  the  link  is  closer  than  imagination  could 
ever  forge,  the  analogy  a  stranger  tale  than  the 
yarns  of  Captain  Kidd. 

The  modern  industry  of  wheat  farming  depends, 
by  one  of  the  romantic  balances  of  world  com- 
merce, upon  the  supply  of  binder  twine  for  the 
mechanical  harvester,  a  supply  which  comes  alone, 
to-day,  from  the  cultivation  of  a  humble  cactus 
plant  in  far-off  Yucatan.  The  great  Mexican  in- 
dustry of  raising  this  henequen  or  sisal  hemp  was 
prostituted  by  Mexican  revolutionists  to  the  ma- 
nipulation of  the  binder  twine  market  so  that  in 
four  years  more  than  a  hundred  million  dollars  in 
artificially  inflated  prices  were  dragged  from 
American  farmers.  Thus  it  was  that  through  the 
helpless  years  of  the  Great  War,  all  who  ate  the 
bread  of  the  wheat,  from  you  and  me  in  America 
to  the  starving  children  of  Belgium,  paid  bitter 
tribute  to  the  greed  of  Mexican  agitators. 

159 


160  TRADING  WITH  MEXICO 

The  story  of  Yucatan  is  no  mere  tale  of  the  by- 
play of  revolution,  the  "fortunes  of  war"  or  the 
"necessary  accompaniments  of  a  great  social  up- 
heaval. ' '  It  is  the  history  of  the  deliberate  looting 
of  a  commonwealth  and  of  an  indispensable  in- 
ternational industry.  In  the  name  of  socialism, 
shouting  the  battle-cries  of  the  age-long  struggle 
for  human  freedom,  Mexican  revolutionary  lead- 
ers turned  the  richest  agricultural  state  of  Mexico 
into  a  desert  waste,  prostituted  the  only  creative 
industry  in  the  whole  country  to  the  looting  of  the 
world's  farmlands  and  the  taxing  of  every  loaf  of 
bread  consumed  in  the  world.  The  vast  tribute 
which  thus  poured  into  the  coffers  of  revolutionary 
government  was  utterly  losi;  to  public  vision  al- 
most before  it  had  left  the  market-places,  and  not 
one  cent  of  it  was  ever  turned  to  the  easing  of  the 
sorry  human  burden  of  the  Mexican  peon  or  de- 
voted to  the  education  and  upbuilding  of  the  Mex- 
ican people. 

The  story  of  Yucatan  is  the  story  of  as  grue- 
some a  rape  of  Mother  Earth  as  man  has  known. 
Beginning  with  the  familiar  picture  of  the  down- 
trodden peon  of  the  Diaz  time,  it  runs  the  gamut 
through  the  marching  armies  of  conquerors, 
through  a  cycle  of  high-sounding  socialism  to 
bloody  oppressions,  and  on  to  a  newer  despotism 
and  finally  to  utter  economic  collapse.  In  the  end 
it  flattens  down  into  the  present,  an  era  of  capi- 


THE  EAPE  OF  YUCATAN  161 

talistic  struggle  in  which  the  state,  by  the  laws  of 
economics  which  its  despots  perverted  so  vigor- 
ously, is  being  ground  between  the  millstones  of 
opposing  forces  of  the  very  business  which  was 
once  the  source  of  all  its  wealth  and  all  its 
progress. 

Upon  the  wheat  crop  of  the  world  depends  the 
life  of  the  world,  and  upon  the  mechanical  har- 
vester depends,  literally,  the  life  of  the  modern 
wheat  industry.  In  its  turn,  the  operation  of  the 
harvester  is  dependent  upon  the  millions  of  miles 
of  binder  twine  which  alone  make  possible  the 
handling  of  the  wheat  on  its  way  from  the  stand- 
ing fields  to  the  thresher  which  converts  it  to  gol- 
den grain.  Since  Cyrus  McCormick  first  offered 
his  "  reaper "  to  the  American  farmer,  more  than 
fifty  years  ago,  invention  has  sought  far  and  wide 
for  freedom  from  the  need  of  twine  for  the  bind- 
ing of  the  sheaves,  but  neither  "  header "  nor  me-' 
chanical  flail  has  been  able  to  achieve  it;  to-day 
the  wheat  farmer  must  have  twine,  and  that  by 
the  hundreds  and  millions  of  pounds,  to  harvest 
his  crop. 

Thus,  because  the  sisal  hemp  or  henequen  of 
Yucatan  is  the  only  fiber  which  can  be  produced 
in  sufficient  quantities  at  a  low  price  to  meet  the 
farmer's  need  for  binder  twine,  the  wheat  for  the 
world's  food  supply  depends  vitally  on  the  prod- 
uct of  this  one  distant  state  of  Mexico.  Without 


162  TRADING  WITH  MEXICO 

its  humble  aid,  the  American  farmer  might,  con- 
ceivably, hark  back  to  the  binding  of  wheat 
sheaves  by  hand — it  is  certain  that  we  could  antici- 
pate the  scrapping  of  billions  of  dollars '  worth  of 
mechanical  harvesters  in  the  substitution  of  some 
other  method  than  theirs.  The  only  other  fiber 
that  will  serve  for  the  making  of  binder  twine  is 
true  Manila  hemp,  whose  total  crop  would  not  fill 
a  tenth  of  the  needs  of  the  world's  annual  harvest, 
and  whose  finer  quality  and  greater  cost  have 
caused  it  to  be  devoted  almost  exclusively  to  the 
making  of  high-class  cordage.  Cotton  and  jute  and 
silk  and  all  other  known  or  promised  vegetable  or 
animal  fibers  from  which  binder  twine  might  con- 
ceivably be  made  have  proven  useless  for  the  pur- 
pose. One  of  them  is  too  stout,  one  too  soft,  one 
too  short  of  fiber,  one  not  brittle  enough,  another 
too  brittle.  Sisal,  the  Yucatan  henequen,  is  to-day 
the  only  hemp  which  meets  all  demands  of  the 
world's  annual  wheat  harvest,  a  demand  which  has 
reached  the  colossal  total  of  400,000,000  pounds  a 
year. 

Upon  this  need  has  been  built  the  one  great  crea- 
tive industry  of  Mexico,  the  one  business,  agricul- 
tural or  manufacturing,  which  in  Mexico  produces 
wealth  through  human  energy.  Its  source  is  the 
long-leaved  henequen  plant,  to  whose  necessarily 
slow  growth  for  fiber  the  sandy,  desert  soil  of  the 
Yucatan  coastland  is  peculiarly  adapted.  The 


THE  EAPE  OF  YUCATAN  163 

henequen  is  a  species  of  the  great  agave,  that 
strange,  cactus-like  "Century  plant, "  which  is 
found  in  one  form  or  another  in  almost  all  desert 
countries.  As  the  maguey,  it  grows  in  the  great 
Central  Mexican  plateau,  furnishing  the  heavy 
drink  called  pulque,  and  giving  up  a  hand-ex- 
tracted fiber  which  has  been  woven  into  the  rai- 
ment of  the  Indians  of  the  Valley  of  Mexico  for 
centuries.  Still  other  varieties,  in  the  warmer 
sections  of  Mexico,  furnish  food  for  cattle  and, 
distilled,  the  fiery  mescal  or  tequila  which  is  an 
even  more  terrible  curse  of  Mexico  than  the  much- 
berated  pulque. 

It  is  the  henequen,  however,  which  is  the  most 
commercially  useful  of  all  the  agaves,  for  its  nar- 
row leaves,  three  to  four  feet  long,  are  peculiarly 
adapted  to  the  mechanical  extraction  of  their  fiber 
(which  most  of  the  agaves  are  not).  The  coarse, 
rasping,  yellow  strands  have  the  thickness  and  the 
strength  of  horsehair,  so  that  they  survive  the 
vigorous  de-pulping  process  of  the  great  gin-like 
machines.  After  drying,  they  furnish  a  stout  fiber 
which,  when  woven  into  thick  cord,  ties  the  wheat 
sheaves  in  the  harvester,  and  breaks  easily  as  each 
sheaf  is  thrown  back  into  the  thresher  in  the  gor- 
geous pageant  of  the  harvest. 

This  henequen,  the  sisal  hemp  of  commerce,  was 
first  exported  in  1864,  and  by  1880  was  one  of  the 
well-known  but  minor  fibers  in  the  American 


164  TRADING  WITH  MEXICO 

market.  In  1898,  when  the  Spanish- American  war 
cut  off  the  exports  of  Manila  hemp,  henequen 
sprang  into  immediate  and  great  importance,  its 
price  rose  from  2~y2  cents  to  10  cents  a  pound  in 
New  York,  and  an  immediate  increase  in  the  indus- 
try and  in  the  economic  importance  of  the  state  of 
Yucatan  took  place.  There  was  a  lively  boom  in 
henequen  lands,  and  incidentally  an  improvement 
in  social  and  political  conditions  in  Yucatan,  fol- 
lowed by  something  of  a  slump  with  a  few  mild 
panics  around  1907. 

But  henequen  fiber  had  been  definitely  estab- 
lished in  the  market  and  selling  as  it  did  at  an 
average  price  of  5%  cents  a  pound,  became  the 
great  staple  for  the  manufacture  of  binder  twine. 
This  new  and  virtually  inexhaustible  supply  of 
cheap  fiber  for  twine-making  played  its  part  in 
the  broadening  use  of  the  mechanical  harvester, 
until  by  1915  Yucatan  henequen  binder  twine  was 
being  shipped  to  every  wheat  producing  area  in 
the  world,  from  the  Siberian  steppes  to  the  pam- 
pas of  the  Argentine. 

In  1914  the  exports  from  Mexico  were  more  than 
a  million  bales  or  approximately  400,000,000 
pounds,  which  was  a  doubling  of  production  in 
fourteen  years.  The  current  price  of  about  6 
cents  a  pound  had  enabled  the  Yucatan  growers  to 
build  up  immense  fortunes  and  made  it  possible 


THE  RAPE  OF  YUCATAN  165 

for  the  manufacturers  of  the  thousands  of  tons  of 
binder  twine  to  furnish  it  to  the  American  farmer 
at  less  than  10  cents  a  pound. 

The  chief  manufacturers  of  binder  twine  and, 
therefore,  the  chief  buyers  of  Yucatan  henequen, 
are  the  International  Harvester  Company,  which 
makes  about  half  the  binder  twine  used  in  the 
world,  the  Plymouth  Cordage  Company,  which 
makes  about  a  quarter  of  the  entire  supply,  and 
various  state  penitentiaries  in  the  wheat  belt  of 
the  United  States.  All  of  these  manufacturers 
work  on  close  margins  for  the  Harvester  Com- 
pany's business  is  selling  harvester  machines  and 
it  seems  interested  materially  in  keeping  the  price 
of  such  accessories  as  twine  as  low  as  possible. 
The  effect  of  this,  combined  with  Yankee  shrewd- 
ness, has  been  a  continuous  effort  to  keep  the 
price  of  Yucatan  henequen  down  to  rock  bottom, 
and  to  this  end  its  buyers  have  been  cheerful  ar- 
biters of  the  price  of  the  sisal  in  the  Mexican 
market. 

They  were  never,  however,  quite  the  grasping, 
grinding  capitalistic  despots  they  were  described 
as  being  by  the  Yucatecans,  for  those  of  us  who 
can  remember  back  into  the  philosophic  days  be- 
fore 1914  will  recollect  that  it  was  not  customary 
for  even  American  capital  to  kill  the  geese  that 
laid  the  golden  eggs.  The  Yucatan  hacendados 


166  TRADING  WITH  MEXICO 

were  encouraged  to  demand,  and  get,  comfortable 
prices  for  their  product,  and  incidentally  to  plant 
large  new  acreages  of  the  henequen  plants. 

It  was  this  large  planting,  which  went  on  from 
1900  to  1914,  which  caused  the  first  glimmering  of 
the  idea  of  "direct  action"  on  the  part  of  the 
hacendados,  the  growers  of  the  sisal.  It  takes 
seven  years  for  henequen  plants  to  come  into  bear- 
ing, and  the  prospect  of  immensely  increased  pro- 
duction and  probably  lowered  prices  inspired  the 
first  idea  of  a  pool  which  would  maintain  the  old 
price  levels.  In  1912  a  scheme  for  regulating  the 
price  of  henequen  was  first  presented  to  his  fellows 
by  a  Yucatan  hacendado.  His  idea  was  not  so 
much  to  create  an  artificial  shortage  by  storing  the 
hemp,  as  to  form  some  sort  of  organization  which 
would  have  first  chance  to  buy  the  henequen  crop 
and  thus  make  the  hacendados  participants  in  the 
profits  made  by  the  jobbers  or  middlemen. 

The  organization  which  resulted,  in  1914,  was 
called  the  "Comision  Eeguladora  del  Mercado  de 
Henequen"  (Commission  for  Eegulating  the 
Henequen  Market),  or,  for  short,  the  "Eegula- 
dora." It  was  not,  however,  a  great  success,  for 
the  Eeguladora  was  only  an  organization  buying 
in  competition  with  the  old  established  agents,  and 
the  growers  still  pursued  their  own  immediate  in- 
terests in  seeking  their  markets.  Cooperation 
has  never  been  one  of  the  outstanding  virtues  of 


THE  EAPE  OF  YUCATAN  167 

the  Mexicans,  and  in  the  selling  of  their  crops  the 
Yucatecan  hacendados  have  never  shown  any 
sign  of  a  break  away  from  the  national  individual- 
ism. The  hacendados  have  always  done  their  busi- 
ness in  Merida,  the  capital  and  business  center  of 
Yucatan.  They  pass  from  one  sunlit  office  to  an- 
other, wailing  dismally  over  the  terrible  prices  the 
comfortably  ensconced  buyers  offered  them  and 
their  unfortunate  fellows,  but  seeking  and  ready 
at  a  momentary  hint  to  drive  a  bargain  which 
would  cut  their  neighbors'  throats  on  the  possible 
chance  of  a  temporary  personal  profit.  The  gen- 
tlemanly agreement  of  the  Reguladora  was  not, 
under  these  circumstances,  a  controlling  factor  in 
the  henequen  market. 

This  was  the  situation  when,  in  March,  1915, 
General  Salvador  Alvarado,  a  doughty  retainer  of 
President  Carranza,  "captured"  the  state  of 
Yucatan  with  an  army  of  8,000  men  which  he  had 
brought  from  Vera  Cruz.  Although  Mexico  has 
been  in  revolution  since  1911,  Yucatan  had,  till 
this  time,  taken  little  part,  accepting  new  gov- 
ernors with  mild  surprise  but  no  opposition  as  one 
administration  succeeded  another  in  Mexico  City. 
Yucatan  is  a  great  peninsula  far  to  the  east  of  the 
Mexican  mainland,  unconnected  by  railways,  and 
thirty-six  hours'  journey  by  fast  steamer  across 
the  Gulf  of  Mexico  from  Vera  Cruz.  The  Yuca- 
tecans  have  always  considered  themselves  as  a 


168  TRADING  WITH  MEXICO 

people  somewhat  apart  from  other  Mexicans,  and 
during  many  of  the  revolutions  previous  to  Diaz, 
the  peninsula  remained  aloof  and  politically  inde- 
pendent, re-entering  the  Mexican  confederation 
only  toward  the  close  of  the  pre-Diaz  era. 

General  Alvarado  is  a  product  of  northern 
Mexico.  He  belongs  with  the  true  Carran- 
cista  group  in  Mexican  politics,  has  been  a  candi- 
date for  president  of  Mexico  and  has  made  many 
trips  to  the  United  States  as  a  financier,  most  re- 
cently as  an  envoy  of  the  de  la  Huerta  government 
in  search  of  a  rehabilitating  loan.  All  this,  how- 
ever, has  come  since  his  spectacular  experience  in 
Yucatan.  In  that  state  he  gained  the  experience, 
and  political  record,  which  maJe  him  aspire  to 
the  presidency  of  Mexico,  and  earned  his  diploma 
as  revolutionary  financier.  There,  also,  he  prob- 
ably first  acquired  those  radical  ideas  which  en- 
abled him  to  assert,  as  he  did  in  the  Mexican 
{Chamber  of  Deputies  in  November  of  1920 : 

"I  am  a  bolshevist,  I  have  always  been  a  bolshe- 
yist,  and  I  shall  always  be  a  bolshevist. ' ' 

General  Alvarado 's  first  government  work  was 
as  a  custom-house  employee,  but  he  joined  the 
Carranza  movement  early  and  early  rose  to  the 
rank  of  general  through  the  manifestation  of  a 
[thoroughly  forceful  personality  and  a  ruthless 
preoccupation  with  his  own  advancement. 

Yucatan,  in  its  isolation,  in  its  great  wealth,  and 


THE  RAPE  OF  YUCATAN  169 

its  easy-going  manners,  presented  General  Alva- 
rado  with  the  opportunity  of  his  career.  Here 
were  ungathered  riches  for  revolutionary  spoils, 
here  was  noble  opportunity  for  the  uplift  of  the 
"submerged  85  per  cent,"  here  was  waiting  easy 
military  glory  of  conquest  with  no  one  to  oppose. 
In  going  to  Yucatan,  General  Alvarado  was,  more- 
over, encumbered  by  none  of  the  political  and 
business  experience  which  delays  the  prompt  exe- 
cution of  inspired  ideas.  Nor  was  he  inhibited  by 
any  preconception  of  the  needs  of  the  common- 
wealth or  its  chief  industry,  for  this  was  his  first 
visit  to  his  future  principality.  All  he  knew  or 
heard  was  that  Yucatan  was  rich  and  that  its  pro- 
letariat was  "oppressed,"  largely  by  wicked  for- 
eigners of  shocking  and  predatory  manners. 

When  he  arrived  in  Yucatan,  General  Alvarado 
noted  with  interest  the  beauty  of  that  gem  of 
Mexican  state  capitals,  Merida,  with  its  sun-clear 
streets  and  its  beautiful  parks  and  public  build- 
ings. He  saw  the  luxurious  equipages  and  homes 
and  visited  the  great  haciendas  of  henequen.  In 
the  meantime,  he  looked  over  the  documents  in  the 
governor's  office  and  the  stock  of  gold  in  the  state 
treasury.  He  scowled  his  disapproval,  as  was 
the  Carrancista  habit,  at  the  foreigners  engaged  in 
the  henequen  business.  Then  his  attention  was 
called  to  the  charter  of  the  Eeguladora,  the  harm- 
less agreement  of  the  hacendados  to  keep  the  price 


170  TRADING  WITH  MEXICO 

of  the  fiber  as  high  as  they  could  and  still  not  soil 
their  hands  with  trade. 

This  charter  had  courteously  made  the  gover- 
nor of  the  state  ex-officio  head  of  the  Reguladora. 
Promptly,  and  without  more  authority,  General 
Alvarado  took  charge  of  the  organization.  His 
first  act  was  to  force  upon  the  unhappy  hacen- 
dados,  through  the  authority  of  their  own  instru- 
ment, a  corporation  which  took  their  own  business 
[utterly  out  of  their  own  hands  and  forced  them  to 
the  acceptance  of  official  dictation  without  dissent 
or  question. 

To  the  end  of  organizing  his  Reguladora  in 
line  with  modern  thought  and  to  thorough  effi- 
ciency for  his  own  ends,  he  invitti  in  from  Mexico 
City  the  one  set  of  brains  in  the  Carranza  admin- 
istration, those  of  Luis  Cabrera,  and  called  in  the 
motley  company  of  self-styled  "socialists"  who 
had  been  drawn  to  Yucatan  by  the  lurid  tales  of 
revolutionary  propagandists  who  had  predicted 
the  inevitable  uprising  of  the  oppressed  prole- 
tariat when  opportunity  should  be  given  them. 

This  cabinet  laid  out  the  Eeguladora  plan,  and 
two  American  bankers  of  New  Orleans,  Saul 
Wechsler  and  Lynn  H.  Dinkins,  organized  a  syn- 
dicate which  agreed  to  finance  the  cornering  of  the 
henequen  market  up  to  $10,000,000.  There  was  no 
socialism  in  this  phase  of  the  plan,  for  the  bankers 
;were  to  receive  a  commission  of  $4  per  bale  on  all 


THE  RAPE  OF  YUCATAN  171 

henequen  marketed,  plus  the  current  banking  rate 
of  interest  for  all  moneys  needed,  the  loans  to  be 
fully  secured  by  mortgages  against  hemp  in  stor- 
age or  in  transit. 

So  far  all  was  well,  but  here  Alvarado  met  his 
first  difficulty.  The  henequen  growers  were  not 
socialistically  inclined,  nor  were  they  as  trusting 
of  his  good  faith,  or  so  well  secured  as  the  Ameri- 
can bankers,  nor  had  they  so  much  to  gain  or  so 
little  to  lose  as  the  "  socialist "  advisers  of  the 
governor.  Many  of  them  refused  to  be  bound  by 
the  new  rules  of  the  Reguladora,  which  included, 
amongst  others,  a  provision  that  no  hemp  should 
be  sold  to  any  agent  or  interest  save  the  Regula- 
dora. 

But  Alvarado 's  government  called  on  the  hacen- 
dados to  subscribe  to  his  rules  for  the  Reguladora, 
and  to  those  who  refused  it  threatened  (and  gave 
evidence  of  the  fullness  of  its  intentions  to  carry 
out  its  threats)  to  fire  the  fields  and  throw  the 
offending  hacendados  and  their  families  into  the 
flames.  It  organized  the  Red  Guard  of  Yucatan 
(called  the  " Leagues  of  Resistance "),  and  spread 
terrorism  throughout  the  peninsula.  It  drove 
out  the  tiny  group  of  foreigners  who  for  twenty- 
five  years  had  been  engaged  in  " exploiting"  the 
unfortunate  Yucatan  proletariat  by  keeping  the 
capitalistic  hacendados  from  getting  too  much 
money  out  of  American  farmers.  Along  with  them 


172  TRADING  WITH  MEXICO 

went  hundreds  of  the  hacendados  and  their  fami- 
lies, and  also  priests  and  nuns,  while  the  simple 
Indians  who  could  not  take  steamers  for  foreign 
ports  emigrated  quietly  back  into  the  forests  of 
interior  Yucatan. 

For  Alvarado's  henchmen  closed  the  churches, 
burned  their  priceless  historical  records,  and  out- 
raged nuns  and  priests.  They  turned  the  church 
buildings  into  "  labor  temples "  and  barracks  and 
storehouses  from  which  later  was  sold,  over  the 
counter,  the  liquor  which  had  been  confiscated  in 
enforcement  of  "prohibition"  in  Yucatan.  They 
turned  the  schools  of  towns  and  plantations  into 
centers  of  propaganda  and  espionage  under  im- 
ported "  teachers "  who  knew  none  of  the  Indian 
language,  and  many  of  whom  could  not  write  their 
own  names.  They  confiscated  great  haciendas 
under  the  elaborately  "socialistic"  agrarian  law, 
and  for  those  upon  whom  the  iron  hand  did  not  fall 
directly,  established  a  reign  of  terror  in  the  raids 
of  the  "Leagues  of  Resistance,"  whose  crimes, 
from  night-riding  and  burglary  to  rape  and  mur- 
der, the  Legislature  declared  to  be  "political  of- 
fenses" in  the  name  of  "socialism,"  and  thus  out- 
side the  jurisdiction  of  the  common  courts. 

His  henchmen,  foreigners,  Mexicans  and  Yuca- 
tecans,  raised  up  the  previously  contented  "in- 
dustrial workers,"  railway  men,  porters  and 
longshoremen  (numbering  in  all  less  than  9,000 


THE  RAPE  OF  YUCATAN  173 

out  of  a  state  population  of  300,000),  forming  them 
into  unions  whose  increasing  wages  were  over- 
lapped more  rapidly  than  they  were  raised  by  the 
rising  costs  of  the  handling  of  the  imported  com- 
modities upon  which  they,  like  every  one  else,  must 
live  in  desert  Yucatan.  Their  wages,  and  the  cost 
of  living,  multiplied  eight  times  in  the  four  years, 
while  the  wages  of  the  farm  workers  little  more 
than  doubled,  and  a  grievously  added  burden  was 
placed  upon  the  hacendados  who  from  time  imme- 
morial have  taken  up  the  loss  in  increased  food 
prices  so  that  their  farm  workers  may  live. 

By  such  means,  and  with  such  control,  General 
Alvarado  acquired  the  domination  of  the  indus- 
trial life  of  Yucatan  and  of  henequen  production 
upon  which  he  built  up  his  market  corner.  In  the 
selling  of  the  product  so  controlled,  he  raised  the 
price  of  raw  henequen  from  7  cents  a  pound  in 
New  York  to  more  than  19  cents  a  pound  in  the 
same  market.  So  firm  was  his  grip  on  production 
and  on  distribution  that  he  could,  and  did,  with- 
hold stock  which  was  sorely  needed  in  the  harvest 
fields,  bringing  about,  in  1916  (through  this  means 
and  through  the  soaring  prices  which  had  to  be 
asked  for  the  binder  twine  which  was  sold),  an 
investigation  by  a  committee  of  the  United  States 
Senate.  This  committee,  after  months  of  investi- 
gation, completely  exonerated  the  American  manu- 
facturers from  the  charge  of  profiteering,  and 


174  TRADING  WITH  MEXICO 

perhaps  for  the  first  time  in  the  history  of  that 
august  body,  placed  itself  on  record  as  asserting 
that  a  foreign  government  had  acted  the  role  of 
an  iniquitous  trust  in  creating  an  artificial  short- 
age and  artificially  inflated  prices  for  a  product 
vital  to  the  business  of  America's  farms. 

In  the  four  years  that  the  Reguladora  corner 
lasted,  more  than  $200,000,000  in  advanced  prices 
were  taken  from  American  buyers,  an  average  ad- 
vance of  more  than  200  per  cent.  Thus,  granting 
a  legitimate  doubling  of  the  price  of  the  fiber  in 
keeping  with  the  doubling  of  the  costs  of  other 
commodities  in  this  period  (1915-1919),  the  ac- 
cepted figure  of  $112,000,000  of  direct  loot  through 
the  Alvarado  henequen  corner  may  be  taken  as 
literally  true.  And  this  was  loot  that  never 
reached  either  the  cruel  hacendados  who  owned 
the  farms  or  the  workers  who  furnished  the  labor 
for  the  creation  of  the  product.  All  this  and  more 
went  into  the  bottomless  pit  of  Mexican  revolu- 
tionary graft. 

This  henequen  corner  was,  it  must  be  remem- 
bered, created  in  the  name  of  socialism  and  the 
salvation  of  the  downtrodden  peon.  Along  with  it 
went  a  mass  of  other  activities,  wherein  the  funds 
derived  from  the  sale  of  henequen  at  the  advanc- 
ing prices  were  turned  to  schemes  of  ostensible 
government  ownership,  socialization  and  coopera- 
tion. Before  even  the  hacendados  were  given  the 


THE  EAPE  OF  YUCATAN  175 

4  cents  a  pound  guaranteed  them  as  first  payment 
against  the  great  profits  to  come  from  the  "  cor- 
ner, "  the  Reguladora  funds  were  invested  in  the 
purchase  of  the  state  railways,  at  prices  to  this 
day  unknown.  These  funds  also  financed  the  or- 
ganization of  the  Compania  de  Fomento  del  Sur- 
Est  (Development  Company  of  the  South-East) 
and  bought  nine  old  Mexican  coasting  steamers  at 
a  cost  of  $4,000,000  so  that  the  socialists  of  Yuca- 
tan might  not  be  dependent  on  capitalistic  steam- 
ship lines.  The  Reguladora  also  financed  the  drill- 
ing of  oil  wells,  and  built  a  flock  of  tanks  to  contain 
the  oil — which  never  came  out  of  the  ground.  It 
also  built  a  railway,  confiscating  therefor,  "for 
the  common  good,"  one-tenth  of  all  the  rails  and 
equipment  of  the  private  plantation  railways  on 
the  henequen  farms ;  in  a  few  months  it  sold  this 
railway  to  a  favorite  for  $150,000,  a. tenth  of  its 
cash  cost,  payable  in  ten  years. 

The  Cia.  de  Fomento  del  Sur-Est  entered  upon 
the  business  of  relieving  the  oppressed  proletariat 
from  the  wicked  prices  for  the  necessities  of  life 
fixed  by  capitalistic  grocerymen.  It  bought  its 
own  supplies  in  the  United  States,  transported 
them  in  its  own  steamers,  and  sold  them — for  more 
than  the  current  retail  rates !  The  proletariat  did 
not  benefit  from  any  of  these  schemes,  but  the 
government  henchmen  who  bought  in  the  United 
States,  and  those  who  sold  in  Yucatan,  waxed  fat 


176  TRADING  WITH  MEXICO 

and  comfortable,  although  remaining  firm  and 
loyal  socialists  to  the  end. 

All  these  things  were  done  in  the  name  of  so- 
cialism, and  in  that  name,  also,  the  power  of  Regu- 
ladora  gold  was  felt  even  in  the  heart  of  the 
United  States,  in  a  heart  made  sensitive  to  such 
machinations  by  the  nervous  strain  of  the  war 
which  was  already  at  our  throats.  Not  a  little  of 
the  money  derived  from  the  sale  of  henequen  at 
prices  four  and  five  times  normal  was  used  in  the 
conducting  of  a  campaign  of  propaganda.  Mexi- 
can and  foreign  "socialists"  were  kept  in  the 
United  States  lecturing  and  writing  and  publish- 
ing magazines  and  books.  These  activities  were 
radical  and,  in  part  at  least,  I.  W.  W.,  in  general 
character  but  they  were  devoted  also  to  spreading 
the  fame  of  the  Alvarado  brand  of  socialization 
of  industry  in  Yucatan  and  to  the  dissemination  of 
anti- American  ideas  under  the  guise  of  socialism. 

It  was  glory  and  it  was  madness  to  strike  thus 
at  the  heart  of  the  "  Colossus  of  the  North"  as  the 
anti-foreign  Mexican  orators  like  to  call  the 
United  States,  and  at  the  very  same  time  at  the 
"Colossus  of  Mammon,"  as  the  wilder  socialists 
referred  to  us  in  Yucatan.  Carranza  had  tried  the 
former  form  of  baiting,  but  the  combination  of 
the  two  was  an  orgy  of  glory  reserved  for  the 
satellites  of  Alvarado.  Never  was  anything  quite 
so  daring  and  quite  so  magnificent  ever  done  by  a 


THE  RAPE  OF  YUCATAN  177 

Mexican  revolutionist  before,  and  not  even  Car- 
ranza  dared  do  more. 

So  glory  and  madness  traveled  together,  but 
meanwhile,  out  in  the  henequen  fields  and  in  the 
Indian  villages,  Yucatan  toiled  on.  The  simple 
natives  could  not  quite  appreciate  the  " socialists" 
and  literally  fled  in  terror  before  some  of  their 
manifestations,  so  that  in  that  day,  and  in  this  as 
well,  they  tell  you  with  eager  friendship  to  "be- 
ware of  these  terrible  socialists."  To  them,  "so- 
cialist" is  a  name  associated  with  things  that  are, 
to  their  simple  minds,  quite  unsocial. 

Alvarado,  in  his  "conquest"  of  Yucatan,  had 
frankly  spread  terror  throughout  the  peninsula. 
Opposed,  on  his  triumphal  march  to  Merida,  by  a 
small  "home  guard"  of  upper  and  middle  class 
youths,  he  had  captured  and  shot  scores  of  them 
in  cold  blood,  as  "traitors,"  and  pursued  his  way. 
He  had,  as  I  have  noted,  closed  and  sacked  the 
churches,  remarking  that  "As  the  revolution  ad- 
vances, God  recedes."  Then,  on  one  of  the  main 
boulevards  of  Merida,  he  had  allowed  the  dead 
bodies  of  two  who  had  offended  him  to  swing  from 
sunrise  to  sunset  from  a  limb  of  an  oak  tree,  so 
that  thereafter  the  simple  words,  "Remember  the 
oak  tree,"  were  sufficient  to  bring  the  stoutest- 
hearted  conservative  to  terms. 

But  for  all  that,  General  Alvarado  protested 
unfailing  friendship  for  the  peons  and  the  Indians, 


178  TRADING  WITH  MEXICO 

grieved  somewhat  by  their  distrust  of  him,  but 
pronouncing  his  devotion  to  their  welfare  in  no 
measured  terms.  In  his  carrying  out  of  his  "  so- 
cialistic "  policies,  he  did  not,  however,  consult 
their  wishes  or  even  their  possibilities  of  develop- 
ment. His  one  panacea  for  the  ills  of  the  Indians 
was  "land,"  and  land  he  and  his  imported  ad- 
visers were  determined  to  give  them,  no  matter 
whether  they  wanted  it  or  not.  Never  did  the 
ideals  of  socialism,  beautiful  in  themselves,  have 
an  uglier  distortion. 

"Land  distribution"  is,  as  I  have  said,  the  crux 
of  the  protestations  of  all  Mexican  revolutionists. 
Upon  the  alleged  land  hunger  of  the  Indians  the 
revolutionists  have  based  most  of  their  appeals 
for  foreign  sympathy.  The  actual  facts  of  the 
labor  situation,  in  Mexico  and  especially  in  Yuca- 
tan, are  therefore  worth  brief  description  in  this 
connection.  The  so-called  "peonage  system"  of 
Mexico  goes  back  historically  to  pre-Spanish 
times.  It  is  based  on  the  psychological  difficulty 
of  obtaining  continuous  labor.  Continuous  labor 
being  vital  to  such  an  industry  as  henequen  grow- 
ing, there  flourished  in  Yucatan,  previous  to  1914, 
a  system  of  indebtedness  which  was  practically 
slavery.  Laborers  on  the  plantations  were  al- 
lowed to  get  into  debt  in  order  that  they  might  be 
held  on  the  plantations  on  the  pretext  of  working 
out  the  advances  which  were  made  from  time  to 


THE  RAPE  OF  YUCATAN  179 

time  by  the  hacendados.  These  debts  averaged 
about  200  pesos  ($100)  a  man,  and  it  is  undoubt- 
edly true  that  the  system  was  the  origin  of  wicked 
abuses,  a  plantation  store  credit  system  being  de- 
vised to  keep  the  peons  always  in  debt,  and  work- 
ers being  sold  by  the  head  for  their  debts.  Con- 
finement in  barbed  wire  enclosures  was  common  in 
some  sections,  and  altogether  the  picture  of  the 
Yucatan  situation  especially  was  a  very  unlovely 
one. 

But  the  system  of  debt  advances  was  really 
effectively  abolished  under  Madero,  two  full  years 
before  Carranza  and  Alvarado  entered  upon  the 
scene,  and  it  is  worth  noting  that  the  hacendados, 
many  of  whom  had  fortunes  tied  up  in  peon  debts, 
found  themselves  far  happier  to  be  free  from  the 
system  than  were  the  peons.  It  is  indeed  ques- 
tionable whether  the  peonage  system,  as  such 
(and  where  it  was  not  abused),  was  entirely  dis- 
tasteful to  the  Indians  who  were  its  victims.  Lack- 
ing any  ability  to  save,  the  abolition  of  the  system 
of  debt  advances  wrenched  from  their  grasp  the 
only  possible  form  of  enjoying  the  fruits  of  their 
labor  outside  their  usual  hand-to-mouth  existence. 
Under  the  old  systems  they  were  able  to  have 
some  of  the  good  things  of  life  by  getting  an  ad- 
vance in  money,  which  they  spent  gayly,  careless  of 
the  future,  and  then  proceeded  to  work  out  the 
debt  in  the  months  or  years  which  followed.  Basi- 


180  TRADING  WITH  MEXICO 

cally,  the  system  had  its  redeeming  features,  when 
considered  from  the  viewpoint  of  Indian  psychol- 
ogy, even  though  the  abuses  were  such  that  its 
abolition  was  inevitable. 

Linked  up  with  the  peonage  system  was  the 
land  distribution  question,  far  too  complicated  for 
its  origins  to  be  gone  into  here.1  In  Yucatan,  the 
most  heavily  populated  section  is  not  the  most  fer- 
tile. Henequen  is  not  grown  in  the  forests  back 
from  the  sandy  seacoast  where  prehistoric  civili- 
zation left  the  great  ruins  of  a  rich  and  glorious 
empire,  but  on  the  seacoast  itself.  This  virtual 
desert,  extending  in  some  places  twenty-five  miles 
back  from  the  coast,  is  the  land  which  is  adapted 
to  the  growing  of  henequen,  for  a  slow  maturing 
of  the  plant  is  vital  to  the  creation  of  those  long, 
strong  fibers  which  constitute  the  valuable  portion 
of  the  leaves. 

This  so-called  desert  land  is  sometimes  capable, 
when  first  cleared  of  brush,  of  one  or  even  two 
croppings  of  corn.  Then  it  must  lie  fallow  for 
many  years  before  another  food  crop  can  be  raised. 
The  native  Indian,  therefore,  has  little  or  no  -use 
for  a  small  plot,  or  indeed  for  the  ownership  of 
any  plot  of  ground,  unless  he  can  crop  it  once  or 
twice  and  then  sell  it  to  a  henequen  planter,  while 
the  Indian  seeks  other  corn-lands  elsewhere.  If 
the  government  hampers  him  in  moving  about,  he 

i  Both  peonage  and  the  Mexican  systems  of  land  distribution 
are  discussed  at  some  length  in  The  People  of  Mexico. 


THE  KAPE  OF  YUCATAN  181 

prefers  not  to  try  to  live  as  an  independent 
farmer,  but  to  work  on  a  plantation  where  he  can 
get  regular  pay  for  cutting  henequen  leaves,  and 
also  can  cultivate  a  little  corn-plot  lent  him  by  the 
hacendado  and  renewed  each  year. 

Now  the  Indian,  despite  the  fortunes  which  have 
been  made  by  the  hacendados  in  the  henequen  busi- 
ness, has  no  interest  at  all  in  becoming  a  henequen 
grower.  He  knows  from  experience  that  the  value 
of  the  leaves  he  himself  produces  are  little  more 
than  what  he  would  be  paid  on  an  hacienda  for 
cutting  the  hacendado 's  own  leaves,  and  he  knows 
that  he  has  not  the  capital  or  the  initiative  to  go 
into  hemp  production  himself.  The  result  was  that 
some  years  ago,  when  the  communal  land  was 
first  distributed  to  the  Indians,  it  was  cropped 
once  or  twice  and  then  sold  to  the  nearest  hacen- 
dado to  become  henequen  plots. 

Sometimes  indeed,  the  communal  land  was  so 
worthless  for  corn  that  the  hacendados  were  al- 
lowed to  take  it  over  without  payment  or  protest 
and  to  plant  it  to  henequen.  This  loss,  from  the 
Indian  viewpoint,  was  far  from  an  unmixed  evil, 
for  the  natives  of  the  commune  profited  in  the 
gaining  of  an  opportunity  for  assured  livelihood 
close  by  their  homes — difficult  enough  except  on 
the  henequen  farms,  in  the  desert  sections  of 
Yucatan. 

Henequen  production  is  far  more  of  an  indus- 


182  TRADING  WITH  MEXICO 

try  than  it  is  a  farming  project.  Primarily,  it  re- 
quires from  the  planting  of  the  shoots  until  the 
first  leaves  are  ready  for  cutting,  eight  years  of 
continual  and  expensive  care,  for  the  fields  must 
be  kept  clear  of  brush  and  weeds,  the  plants  tended 
and  those  which  die  replaced  with  regularity. 
After  eight  years  of  continuous  outlay,  the  leaves 
are  cut,  brought  into  a  great  industrial  plant  where 
machinery  and  many  workers  are  required  to  re- 
move the  pulp,  to  dry  the  hemp  fiber  on  racks 
under  the  sun,  to  pack  it  into  400-pound  bales  in 
hydraulic  presses,  and  to  ship  it  to  the  distant 
American  market.  The  agricultural  end  of  the 
henequen  business  is  but  a  small  item  in  its  proc- 
ess, and  no  individual  farmer,  even  if  he  has 
moderate  capital,  can  prosper  on  it. 

The  land  distribution  planned  by  Alvarado  was 
to  be  made  from  the  great  henequen  haciendas, 
and  some  of  the  oratory  defending  the  confiscation 
of  those  haciendas  pointed  out  the  fact  that  this 
very  land  had  been  stolen  from  the  Indian  com- 
munes in  years  gone  by  and  was  now  being  re- 
turned to  the  original  Indian  owners.  That  was 
interesting  to  the  pitying  audiences  of  the  Alva- 
rado propagandists  in  the  United  States,  but  it 
was  of  not  the  slightest  interest  to  the  Indians  of 
Yucatan.  They  had  once  owned  that  land,  and 
had  or  had  not  cropped  it  in  corn  once  or  twice. 
They  knew  quite  well  it  was  hardly  worth  the 


THE  EAPE  OF  YUCATAN  183 

trouble  and  the  expense  in  taxes  it  would  be  for 
them  to  own  it  again,  especially  as  they  saw  the 
hacendados  being  skillfully  put  out  of  business  and 
knew  that  with  their  disappearance  went  the  only 
market  in  which  Indians  could  sell  the  land  after 
they  got  it,  or  the  henequen  leaves  if  they  raised 
them. 

Thus  it  came  about  that  despite  the  apparent  in- 
congruity of  the  fact,  the  Indians  of  Yucatan  paid 
almost  no  attention  to  Alvarado's  land  distribu- 
tion plans,  listening  to  the  alluring  official  an- 
nouncements with  stolid  indifference.  They  at- 
tended the  festivals  which  accompanied  the  distri- 
bution, but  they  took  up  no  land  grants. 

There  were  indeed,  many  Indians  who  actually 
took  flight  into  the  interior  of  the  state  as  a  result 
of  the  efforts  to  force  land  upon  them.  The  Mex- 
ican Indian,  of  whatever  tribe,  in  reality  desires 
deeply  but  one  thing — to  be  left  alone  to  pursue 
his  half-savage  life  in  his  own  way,  an  aboriginal 
ambition  which  should  not  be  difficult  to  under- 
stand by  those  who  know  anything  of  the  North 
American  Indian  of  the  United  States.  Socialism, 
like  the  responsibilities  of  land  ownership,  is  be- 
yond his  ken  and  he  literally  ran  away  from  the 
offers  of  either  in  Yucatan. 

Some  Indians,  of  course,  remained,  along  with 
a  great  number  of  the  mixed-blood  "slaves"  who 
had  been  imported  from  the  Mexican  mainland 


184  TRADING  WITH  MEXICO 

into  the  state  during  the  boom  period  of  the  hene- 
quen  business.  These  were  thoroughly  "union- 
ized" in  the  Mexican  sense.  That  is,  they  were 
forced  to  pay  their  poor  little  three  pesos  for  a 
big  red  card  which  proclaimed  their  membership 
in  some  union  or  other,  were  promised  all  that  the 
human  heart  could  desire — and  were  allowed  to 
subsist  as  long  as  possible  upon  the  promises. 
The  unions  were  used  to  the  double  end  of  ruining 
the  capitalistic  landlords  and  reducing  the  output 
of  henequen  so  that  the  price  would  go  higher. 

On  the  plantations  where  these  "unionized" 
workmen  remained,  the  old  task  system,  by  which 
each  man  cut  from  2,500  to  3,000  leaves  a  day,  was 
abandoned  for  a  regular  "eight-hour  day"  in 
which  the  workmen  did  as  little  as  they  cared  to 
do,  and  worked,  not  under  instructions,  but  wher- 
ever they  chose  to  work.  As  a  result  the  cutting 
of  leaves  was  reduced  fully  one-half,  and  the 
plants  near  the  roads  were  overcut  while  those 
deep  in  the  fields  were  allowed  to  blossom  and  go 
to  seed.  Both  processes  killed  the  henequen, 
which  has  to  be  cut  regularly  and  skillfully  in 
order  to  prolong  its  life  of  usefulness.  For  miles 
the  great  pole-like  blossoms  marked  the  henequen 
fields  like  a  forest,  and  thousands  of  productive 
acres  went  to  ruin.  Thus  Nature's  inevitable  proc- 
ess of  flowering  and  decay  marked,  itself,  man's 
crass  flinging  back  of  her  riches  into  the  dust  from 


THE  KAPE  OF  YUCATAN  185 

which  those  riches  had  come  in  the  long  slow 
years  of  his  care  of  her* 

Meanwhile,  other  forces  had  been  at  work,  some 
building  the  pyramid  of  mad  ideas  and  madder 
methods,  others  undermining  the  pyramid's  foun- 
dations upon  the  rocks  of  the  conservative  past 
or  disintegrating  its  mortar  of  imitation  socialis- 
tic idealism.  Of  these  forces,  the  greatest  was  the 
financial  cycle  of  paper  money,  "  short "  drafts 
and  towering  mortgages  against  increasing  stocks 
of  unsold  henequen. 

By  1915,  when  Alvarado  arrived  in  Yucatan,  the 
system  of  paper  money  which  Carranza  used  to 
finance  his  revolution  had  already  engulfed  Mex- 
ico. Carranza  had  recently  issued  his  famous  dic- 
tum that  if  Gresham's  law  (one  of  the  fundamen- 
tal laws  of  economics,  which  holds  that  bad  money, 
in  any  quantity,  inevitably  drives  out  good  money) 
was  interfering  with  the  circulation  of  the  Car- 
ranza paper,  Gresham's  law  should  forthwith  be 
repealed  by  executive  decree.  Billions  of  Car- 
ranza paper  had  been  printed,  and  it  was  already 
the  circulating  medium  in  Yucatan ;  gold  and  bank 
bills  were  in  hiding.  Alvarado  decided  that  the 
time  was  ripe  for  a  currency  of  his  own,  and 
issued,  before  he  had  been  long  in  the  state,  the 
Beguladora  paper  money,  ostensibly  guaranteed 
by  hemp  in  storage  in  Yucatan  and  in  the  United 
vStates.  By  decree,  this  money  had  to  be  received 


186  TRADING  "WITH  MEXICO 

at  the  old  value  of  the  silver  peso,  two  for  one 
American  dollar. 

It  was  a  beautiful  idea,  except  for  economic 
law.  The  bayonets  of  Alvarado 's  soldiers  helped 
keep  up  values  for  a  while,  but  slowly  the  theory 
that  power  can  achieve  anything  the  "  proletariat " 
wants  was  blasted  by  fact.  Alvarado  had  prom- 
ised to  redeem  his  Eeguladora  paper  in  gold  or  in 
New  York  exchange,  but  he  did  not  bother  to  back 
up  his  promises  by  a  limitation  of  the  currency  to 
the  amount  he  could  redeem,  so  that  at  one  time 
he  had  $34,000,000  in  paper  in  circulation,  against 
henequen  stores  of  half  the  value,  stores  which  he 
could  not  liquidate.  The  currency's  value 
dropped,  cent  by  cent,  then  by  groups  of  cents, 
and  finally  it  was  almost  waste  paper,  like  that  of 
Carranza.  There  was  not  enough  henequen  in 
New  York,  nor  enough  gold  in  Yucatan,  to  redeem 
the  paper,  and  the  political  nostrum  for  the  eco- 
nomic ill  of  bad  paper  currency  failed. 

The  failure  was  colossal  enough,  in  any  case, 
without  the  financial  complication  of  the  currency. 
Alvarado  had  closed  the  ports  to  all  hemp  from 
the  interior  that  was  not  consigned  to  the  Eegula- 
dora. That  beneficent  monopoly  allowed  no  ship- 
ments by  rail,  and  before  he  got  through  Alvarado 
had  to  close  the  roads  with  soldiers,  so  that  no 
carts  could  reach  the  port.  Meanwhile,  he  had 
been  boosting  the  price,  deliberately  and  virtually 


THE  EAPE  OF  YUCATAN  187 

by  decree,  until,  as  I  have  said,  it  reached  more 
than  19  cents,  as  against  less  than  7  cents  a  pound 
which  had  been  its  price  before  the  Eeguladora 
took  charge  of  the  market. 

This  raising  of  the  price  cut  off  a  large  portion 
of  the  market, — and  that  had  not  been  anticipated. 
Virtually  all  consumption  of  henequen  except  for 
binder  twine  ceased.  At  19  cents  Manila  hemp 
could  compete — and  it  is  far  better  hemp.  At  19 
cents  jute  cord  can  compete,  and  jute  cord  is  soft 
and  pleasant  to  handle,  and  where  previously  hen- 
equen cord  had  been  used  for  big  bundles  of  news- 
papers and  magazines  and  mail,  jute  was  substi- 
tuted— and  now  the  men  who  handle  the  bundles 
of  newspapers  and  magazines  and  mail  refuse  to 
go  back  to  the  rasping  henequen  cord  which  cuts 
their  hands  so  uncomfortably. 

The  consumption  of  henequen  was  actually  re- 
duced to  half  by  this  deliberate  destruction  of  its 
market.  In  spite  of  the  new  low  prices  to-day, 
this  condition  in  the  general  fiber  market  combines 
with  the  cutting  off  of  the  Eussian  and  some  of  the 
other  European  demand  to  reduce  the  world  con- 
sumption of  the  Yucatan  fiber  to  about  70  per  cent 
of  what  it  was  prior  to  1914.  All  this  loss  the 
Eeguladora  had  to  take  np,  in  addition  to  the 
stores  which  it  laid  aside  to  push  up  the  price. 
Economic  law  was  at  work,  and  all  the  contentious 
statements  that  the  price  was  going  up  only  in 


188  TRADING  WITH  MEXICO 

proportion  to  the  rising  costs  the  world  over  was 
answered  by  the  fact  that  henequen  was  driven 
out  of  the  general  fiber  market  by  other  hemps 
which  had  increased  in  price,  to  be  sure,  but  had 
never  approached  the  geometrical  progression 
which  henequen  assumed  under  the  lordly  sway  of 
Alvarado's  corner. 

When  all  is  said  and  done,  however,  it  was 
Mother  Nature  and  Gresham's  law  which  finally 
broke  the  corner.  Corners  in  the  products  of  Na- 
ture have  a  way  of  piling  up  unexpected  responsi- 
bilities and  finally  loosing  unexpected  forces  which 
swamp  the  unwary  juggler.  So  it  was  in  Yucatan. 
With  about  a  year's  supply  of  fiber  in  storage  in 
the  United  States  and  Mexico,  more  than  half  of 
it  mortgaged  to  American  bankers,  and  with  about 
$10,000,000  in  Eeguladora  currency  in  circulation 
with  nothing  but  photographs  of  gold  stores  to 
guarantee  it,  Alvarado's  henequen  corner  went 
the  way  of  all  the  corners  of  history.  That  was 
in  the  spring  of  1920  when,  after  a  year  of  price 
fluctuation,  Nature  and  the  eternal  laws  of  eco- 
nomics began  gently  wafting  the  prices  downward 
until  they  reached  the  lowest  level  in  fifteen  years. 
Then  it  was  that  the  banking  syndicate,  which  had 
loaned  money  against  henequen  shipments,  fore- 
closed on  250,000  bales  in  storage  in  New  York, 
marking  the  final  chapter  in  the  story  of  Alva- 
rado's  Reguladora  experiment. 


THE  EAPE  OF  YUCATAN  189 

When  the  smash  came,  there  was  an  Association 
of  Henequen  Growers  which  had  been  begging  in 
Yucatan  and  in  the  Supreme  Court  of  Mexico  for 
a  chance  to  take  back  their  business.  As  the  finan- 
cial difficulties  and  the  financial  needs  of  Alva- 
rado  's  henchmen  increased,  the  Beguladora  had  all 
but  given  up  paying  any  money  to  the  haciendas 
where  the  henequen  was  produced.  The  mule  that 
lived  on  sawdust  up  to  the  day  he  died  is  a  fable 
of  ancient  times,  but  even  under  such  loudly  ac- 
claimed "socialism"  as  that  of  Yucatan  something 
has  to  be  paid  for  a  product  which  is  produced 
and  exported.  The  growers  had  all  but  reached 
the  end  of  their  resources,  and  Alvarado  offered 
them  only  paper  money,  which  he  would  or  could 
not  change  into  gold  drafts.  So  just  before  the 
crash,  to  satisfy  the  clamor,  Alvarado  took  his 
way  to  Mexico  City  and  royally  presented  the 
Eeguladora  to  the  Association  of  the  Producers  of 
Henequen. 

The  hacendados  had  hardly  had  time  to  look 
over  the  ruins  when  those  financial  interests  which 
had  loaned  money  on  hemp  that  was  to  sell  around 
20  cents  a  pound  foreclosed  on  those  250,000  bales 
in  New  York  and  New  Orleans,  placing  thereon  a 
value  of  5  cents  a  pound.  Alvarado  was  safe  in 
Mexico  City  preparing  to  visit  New  York  in  an 
effort  to  get  a  loan  of  a  few  hundred  millions  for 
the  government  of  Carranza.  The  hacendados 


190  TRADING  WITH  MEXICO 

held  the  sack,  and  watching  the  sack  was  a  group 
of  financiers,  including  the  Equitable  Trust  Com- 
pany of  New  York,  the  Royal  Bank  of  Canada  and 
the  Interstate  Trust  Company  of  New  Orleans, 
the  latter  the  Dinkins  concern  through  which  most 
of  the  loans  on  the  henequen  had  been  placed. 

Down  in  Yucatan  the  hacendados  had  their 
farms  back,  the  Indians  were  returning  at  night 
to  look  things  over  and  see  whether  the  "  socia- 
lists "  had  retired  far  enough  for  them  to  return 
in  safety  to  their  comfortable  "  slavery " — but  no- 
body had  any  money.  When  Alvarado  left,  the 
hacendados  had  inherited  the  Reguladora  offices, 
and  had  opened  its  money  vaults.  These  vaults, 
photographs  of  whose  gold  stocks  had  been  circu- 
lated by  Alvarado  to  sustain  his  paper  currency, 
were  quite  empty.  The  haciendas  were  in  terrible 
condition,  and  there  was  no  way  of  getting  funds 
with  which  to  rebuild  and  replant  them.  The  only 
hope  was  for  capital  from  outside — Alvarado 's 
"socialism"  had  passed  on  its  way.  Of  the  possi- 
ble sources  of  rescue,  the  chief  was  in  the  group 
of  unhappy  banks  in  New  York,  New  Orleans  and 
'Montreal,  which  were  already  in  the  henequen 
business  with  their  250,000  bales  of  foreclosed 
stock.  The  second  hope  was  the  International 
Harvester  Company,  which  needs  henequen  in  its 
business.  The  hacendados  chose  the  banks,  and 
the  Equitable  Trust  Company,  the  Royal  Bank  of 


THE  EAPE  OF  YUCATAN  191 

Canada,  the  Interstate  Trust  Co.,  and  the  Com- 
ision  Begnladora  (which  still  existed  in  name 
if  not  in  spirit)  formed  a  company,  and  taking 
the  four  initials,  called  themselves  the  Eric  Cor- 
poration. 

There  was  much  rejoicing  in  Yucatan,  for  the 
Eric  was  going  to  lend  a  few  more  paltry  Ameri- 
can and  Canadian  millions  and  reestablish  the 
great  state  industry.  The  Eeguladora  (now  con- 
sisting of  the  hacendados)  turned  in  some  300,000 
more  bales  of  hemp  that  were  stored  at  Progreso, 
the  Yucatan  port,  as  their  part  of  the  capital  stock 
of  the  Eric,  and  the  hacendados  went  back  to  work. 
'  Now  one  of  the  peculiar  things  about  "  eco- 
nomic ruin"  is  that  it  seldom  ruins  a  business — 
individuals  are  the  only  victims.  Yucatan  was 
devastated,  many  thousands  of  acres  put  on  the 
non-productive  list.  There  was  no  money  to  pay 
labor  or  to  finance  the  crops,  but  the  henequen 
business  went  on.  To  all  intents  and  purposes 
about  all  that  had  happened  was  the  elimination 
of  most  of  the  surplus  planting  which  there  would 
have  been  if  all  had  gone  along  properly  and  there 
had  been  no  Alvarado  to  corner  and  destroy  the 
market.  Henequen  kept  on  growing  on  the  hacien- 
das and,  despite  increased  costs  of  handling,  it 
continued  to  move  to  market. 

Don  Avelino  Montes,  a  Spaniard  who  had  been 
the  chief  buyer  of  the  International  Harvester 


192  TRADING  WITH  MEXICO 

Company,  returned  from  his  exile  in  Cuba  and  re- 
sumed buying.  Don  Arturo  Pierce,  the  honorary 
British  vice-consul  who  did  the  buying  for  the 
Plymouth  Cordage  Company,  abandoned  consul- 
ing  and  returned  to  the  henequen  trade.  The  price 
of  Yucatan  hemp  kept  slumping,  but  to  the  sur- 
prise of  the  Eric  people,  the  demand  was  supplied 
with  new  hemp,  and  the  Eric's  stocks  of  old  hemp 
diminished  but  slightly.  The  money  to  rehabili- 
tate the  Yucatan  haciendas  was  not  forthcoming. 
The  old  hemp  stock  had  to  be  sold  first,  and  the 
wretched  hacendados  refused  to  cooperate  and  let 
the  Eric  unload. 

Henequen  deteriorates,  and  also  it  requires  in- 
surance, as  the  many  fires  in  Progreso  and  New 
Orleans  at  the  time  testified.  The  cost  of  holding 
the  half  million  bales  of  henequen  of  the  Eric  is 
about  $2,500,000  a  year,  and  the  price  at  which  it 
was  bought  in,  plus  insurance,  represents  a  cost 
of  about  8  cents  a  pound.  The  price  of  hemp  had 
been  stabilized  at  that  very  figure  by  Senores 
Montes  and  Pierce,  with  some  outside  assistance 
from  New  York  brokers,  but  the  sales  were  made 
in  Yucatan,  of  new  hemp.  So  the  Eric,  in  right- 
eous anger,  cut  the  price  from  8  cents  to  7,  and 
then  to  6.  The  price  of  new  hemp  also  fell,  and 
the  hacendados,  partners  in  the  Eric,  wailed  at 
the  evil  which  was  being  done  them.  However, 
they  continued  to  sell  the  new  crop  at  the  new 


THE  KAPE  OF  YUCATAN  193 

price,  to  the  Harvester  and  the  Plymouth  and 
Henry  Peabody  &  Co.,  and  Hanson  and  Orth, 
while  the  gradually  deteriorating  stocks  of  the 
Eric  went  begging.  The  price  was  finally  cut  tc* 
5  cents,  by  the  Eric.  Yucatan  has  met  this  price,, 
too,  with  new  hemp,  and  because  it  is  still  possible 
to  make  money  out  of  henequen  with  the  price  at 
4  cents  in  New  York,  it  seems  likely  that  Yucatan 
will  continue  to  grow  henequen,  and  to  sell  it. 
Meanwhile,  however,  the  business  doctors  of  the 
Obregon  administration  in  Mexico  City  at  one 
time  succumbed  to  the  pressure  of  the  unhappy 
hacendados  and  even  agreed  to  try  the  "Regula- 
dora"  experiment  all  over  again,  with  the  central 
government  buying  60  per  cent  of  the  henequen 
crop  at  6  cents  a  pound,  and  again  " controlling'' 
the  market,  a  step  in  the  spiral  of  destruction 
which  had  but  a  brief  life  and  little  significance. 
For  the  story  of  Yucatan  is  written  and  the  state 
and  its  great  industry  are  to-day  being  ground 
between  the  wheels  of  the  "  capitalism "  which  the 
beautiful  theories  of  Yucatan 's  "  socialistic "  au- 
tocrats sought  to  destroy. 

This  is  the  outcome  of  Yucatan's  experiments; 
in  Alvarado's  brand  of  so-called  socialism.  The 
price  of  the  fiber  is  back  to  less  than  it  was  before 
the  inflation  began,  the  production  has  been  cut 
from  1,000,000  bales  in  1914  to  less  than  700,000  in 
,1919,  a  decline  of  30  per  cent,  while,  taking  the 


194  TRADING  WITH  MEXICO 

potential  production  from  the  plantings  up  to  1914, 
the  present  production  is  about  half  of  what  it 
would  have  been  if  Alvarado  had  never  come  to 
Yucatan.  The  haciendas  are  back  in  the  hands  of 
their  original  owners,  the  market  is  in  the  hands 
of  foreign  capital,  and  foreign  capital  is  fighting 
over  the  spoils  with  what  seems  to  the  Yucatecans 
utter  and  cruel  disregard  of  the  amenities  of  gen- 
tlemen. The  $112,000,000  squeezed  from  Ameri- 
can farmers  and  the  other  untold  millions  taken 
from  Yucatan  by  loot,  by  false  prices  in  ' '  coopera- 
tive stores, "  by  freight  rates  on  the  graft-owned 
railways,  and  all  the  other  means  used  by  Alvara- 
do 7s  retainers,  have  gone  to  the  enrichment  of  his 
group  and  to  the  upkeeping  of  the  Carranza  gov- 
ernment. No  noticeable  part  of  it  has  remained  in 
Yucatan,  and  save  for  increased  wages  all  around 
(and  the  world  has  surely  learned  that  this  is  not 
prosperity)  no  possible  profit  has  remained.  The 
spiral  cycle  is  complete,  and  none  has  gained, 
not  even  the  predatory  capitalists,  who  are  unhap- 
pily cutting  each  other's  throats  in  an  effort  to 
solve  the  problems  into  which  they  were  swept  by 
the  machinations  of  Alvarado  and  his  henchmen. 
To-day  Yucatan  is  not  free  from  the  domination 
of  the  " socialists,"  but  that  domination  is  politi- 
cal, marked  by  those  outrages  which  have  come  to 
be  merely  a  part  of  politics  in  Mexico.  Elections 
are  held  from  time  to  time,  elections  wherein  two 


THE  EAPE  OF  YUCATAN  195 

parties  of  socialists  alone  confronted  each  other. 
The  battle  is  bitter,  as  battles  are  when  brothers 
are  the  contestants.  There  is  still  killing  and  loot, 
and  women  and  children  suffer  death  and  worse  in 
the  solution  of  such  glowing  political  questions  as 
whether,  we  might  say,  the  flag  of  Yucatan  should 
be  all  red  or  merely  red  with  a  black  bar  across  it 
— its  problems  are  daily  forgotten,  for  the  real 
issue  is  only  to  find  out  who  should  have  the  next 
hand  at  the  graft.  Socialistic,  to  be  sure,  because 
all  Mexican  manifestations  to-day  are  masque- 
rading under  the  name  of  socialism,  but  quite  as 
little  in  tune  with  true  socialistic  ideals  as  a  battle 
between  two  factions  in  Tammany  Hall  over  the 
control  of  New  York  politics  would  be  socialism. 


CHAPTER  VIII 

THE  BOMANCE  OF  MEXICAN  OH. 

WHEN  you  cross  the  Mexican  border  at  Laredo, 
oil  enters  your  consciousness — and  your  clothes. 
It  is  everywhere,  the  thick,  odorous  chapapote 
which  furnishes  the  fuel  for  Mexico's  locomo- 
tives, the  energy  for  every  Mexican  industry 
which  has  no  water  power,  the  pavements  for 
her  streets,  and,  I  am  still  convinced,  the  heavy 
lubricant  with  which  the  sandal-clad  brakeman  of 
our  train  eased  an  incidental  hot-box.  In  Tam- 
pico,  whence  comes  all  the  oil  of  Mexico,  the  heavy, 
black  " crude"  is  even  more  ubiquitous.  It 
1 ' tars"  your  shoes  when  you  walk  abroad;  it  deco- 
rates your  clothes  when  you  ride  in  anybody's 
motor  car  or  motor  boat;  it  oozes  between  your 
toes  and  sticks  in  your  hair  when  you  bathe  at  the 
beach. 

But  the  physical  presence  of  oil  is  as  a  whiff 
from  the  dead  well  at  Dos  Bocas  compared  to  its 
spiritual  domination  in  all  Mexican  affairs.  Oil 
is  the  greatest — I  had  almost  said  the  only — 
wealth  of  Mexico  to-day,  its  possession  the  issue 
of  one  of  the  mighty  diplomatic  battles  of  recent 
times,  while  the  taxes  and  graft  of  it  have  fed  the 

196 


ROMANCE  OF  MEXICAN  OIL        197 

wellsprings  of  ten  years  of  devastating  revolu- 
tions. 

Far  and  away  and  by  many  fold,  oil  is  the 
largest  single  item  of  export  of  Mexico,  and  the 
yaried  needs  of  the  oil  industry  and  of  the  bene- 
ficiaries of  that  industry  dominate  the  imports 
as  well.  To  Tampico  go  shiploads  of  steel,  ma- 
chinery and  supplies,  and  trainloads  of  soap  and 
shoes;  the  factors  which  build  civilization  go 
chiefly  and  all  but  alone,  in  Mexico,  to  the  oil 
fields. 

Oil  dominates  the  political  life  of  the  country 
not  because  oil  companies  or  oil  millionaires  seek 
to  control  the  Mexican  government  but  because  the 
vast  unbelievable  wealth  which  is  pouring  into  the 
coffers  of  that  government  in  taxes  and  in  tribute 
makes  revolution  a  game  the  stakes  of  which 
eclipse  any  sum  or  any  potentiality  of  wealth  or 
power  which  has  ever  been  known  in  Mexico. 

Oil  is  the  inspiration  for  the  "nationalization" 
policies  which,  forged  by  foreign  radicals  and 
given  edge  by  Mexican  cupidity,  the  Carrancistas 
wrote  into  their  Constitution  of  1917.  This  policy 
of  nationalization,  the  decrees,  the  laws,  the  taxa- 
tion and  the  graft  which  have  come  in  its  train, 
have  brought  into  the  field  of  diplomatic  contro- 
versy the  whole  problem  of  the  right  of  a  govern- 
ment to  enforce  radical,  socialistic  or,  if  you  will, 
bolshevik  policies  against  foreign  interests  which 


198  TRADING  WITH  MEXICO 

may  have  entered  a  country  and  developed  it 
under  older,  more  conservative  ideals  and  systems 
of  government. 

For  the  oil  industry  of  Mexico  is  overwhelm- 
ingly a  foreign  enterprise.  American  and  British 
and  Dutch  are  the  flags  which  should  fly  from  the 
oil  derricks,  for  neither  Mexico  nor  Mexicans  have 
had  a  hand  worth  the  naming  in  the  opening  of  the 
nation's  richest  treasure-house.  The  search  for 
oil  in  Mexico  has  taken  on  the  nature  of  a  race,  a 
battle,  between  British  and  American  oil  interests, 
a  battle  not  without  its  tremendous  significance  in 
the  world  oil  situation.  But  behind  this  struggle, 
which  is  still  and,  we  may  hope,  will  remain  a 
friendly  one,  loom  controversies  which  are  vaster 
than  Mexico  or  England  or  America,  problems  on 
whose  solution  the  very  future  of  our  civilization 
depends. 

For  the  real  battle  in  Mexico  is  not  between  the 
two  great  Anglo-Saxon  powers,  but  between  the 
powers  of  light  and  the  powers  of  darkness.  In 
Mexico's  oil  fields  to-day  is  being  settled  the  ques- 
tion of  whether  enterprise  shall  have  the  right  to 
bring  the  riches  of  the  earth  to  the  aid  of  hu- 
manity, of  whether  industrial  power  belongs  to  the 
backward  people  who  by  accident  find  that  power 
in  their  inept  hands,  or  to  those  who  can  develop 
and  raise  it  up  to  the  service  of  mankind.  Upon 
the  issue  in  Mexico  depends  not  only  the  usefulness 


ROMANCE  OF  MEXICAN  OIL        199 

of  all  the  petroleum  resources  of  that  country,  but 
the  future  development  of  oil  in  Colombia,  Vene- 
zuela, all  South  America,  all  Asia,  all  Africa.  And 
the  future  of  oil  development  in  those  lands  is 
the  future  of  the  world's  oil  supply,  for  there, 
alone,  remain  stores  sufficient  to  meet  the  multi- 
plying needs  of  the  world. 

The  solution  of  this  question  is  vastly  compli- 
cated. Within  the  oil  situation  itself  are  many 
problems  such  as  those  just  noted.  Bearing  upon 
it  is  the  tangle  of  cross-purposes,  indirections  and 
varying  psychologies.  That  solution  is  made  all 
but  impossible  by  the  conditions  of  Mexico  to-day, 
by  the  flabby  weakness  of  the  rulers  of  the  Mexi- 
can people,  by  their  blindness  and  selfishness.  It 
has  been  jammed,  time  and  again,  by  the  failure 
of  the  oil  companies  and  their  representatives  to 
assert  their  rights  with  a  skill  equal  to  that  of  the 
Mexicans  in  casting  up  mountains  of  controversy 
out  of  mole  hills  of  technicality. 

But  the  story  of  Mexican  oil  is  not  all  ugly  call- 
ing of  names,  not  all  mere  hopeless  tangle.  The 
history  of  its  discovery  and  development  is  rich 
with  color.  The  romance  of  an  oil  field,  like  the 
romance  of  a  gold  camp,  is  always  a  thrilling  tale. 
But  the  story  of  Tampico  has  this  other  element, 
for  it  is  indeed  the  great  romance  of  our  race,  the 
tale  of  the  white  man  round  the  world,  the  build- 
ing of  gigantic  enterprises,  the  harnessing  of  un- 


200  TRADING  WITH  MEXICO 

known  forces,  neglected  for  centuries  by  apathetic 
natives,  unlocked  by  the  vision  and  the  enterprise 
of  the  Anglo-Saxon. 

Oil  began  with  Tampico,  but  the  story  of  Tam- 
pico  antedates  oil.  It  goes  back  to  the  late  80 's, 
when  one  of  the  great  railway  builders  of  Ameri- 
ca 's  youth  left  Kansas  for  Mexico.  A.  A.  Robinson, 
who  surveyed  and  built  the  Sante  Fe  Railroad 
from  the  Kansas  prairies  to  the  Pacific  Ocean, 
who  swung  the  track  of  the  Denver  and  Rio 
Grande  Railroad  above  the  rapids  of  the  Royal 
Gorge,  was  also  one  of  the  great  builders  of 
modern  Mexico.  Leaving  the  Santa  Fe  in  1889,  he 
became  president  of  the  Mexican  Central  and  built 
almost  the  whole  of  this  first  standard  gauge  line 
in  the  country,  its  branches  and  tributaries  toward 
the  rich  granary  of  Mexico  about  Guadalajara  in 
the  west,  to  the  mines  of  Pachuca  in  the  mountains 
and  to  Tampico  on  the  Gulf  of  Mexico. 

Tampico,  a  wretched,  fever-ridden  village  be- 
side a  beautiful  river,  was  no  port  in  those  days. 
The  railroad  which  brought  Mr.  Robinson  to  Tam- 
pico brought  also  the  engineers  who  built  the  great 
jetties  which  cleared  the  bar  and  opened  Tampico 
to  the  world,  carried  the  ores  of  Pachuca  to  their 
markets  and  began  the  conscious  development'  of 
what  is  now  the  busiest  seaport  of  Mexico.  The 
railroad  company  built  and  paid  for  the  jetties, 
and  under  Mr.  Robinson  a  short-line  to  Mexico 


ROMANCE  OF  MEXICAN  OIL        201 

City  was  surveyed  and  construction  was  begun,  to 
be  halted,  in  1908,  by  the  government  merger  of 
the  lines. 

All  this  seems  to  lead  far  away  from  oil,  but  it 
was  in  1900,  two  years  before  the  jetties  were  com- 
pleted, that  Mr.  Robinson  invited  Edward  L.  Do- 
heny  and  his  partner,  the  late  Charles  A.  Canfield, 
to  Tampico  to  develop  oil  wells.  Doheny,  who  had 
made  himself  famous  and  unpopular  by  discover- 
ing petroleum  in  the  middle  of  Los  Angeles,  came 
to  examine  the  seepages  of  which  Robinson  had 
told  him  in  the  hope  that  he  might  find  an  oil 
to  help  the  Mexican  Central  solve  its  fuel  problems, 
for  the  coal  of  Mexico  is  scarce  and  poor,  and  all 
the  fuel  for  the  railways  had  to  be  imported. 

Mr.  Robinson  agreed  to  buy  the  oil  for  fuel  if 
Mr.  Doheny  developed  it,  and  it  was  this  encour- 
agement, this  faith  of  two  great  believers  in  Mex- 
ico, which  brought  about  the  discovery  and  the 
later  development  of  Mexican  oil.  The  board  of 
directors  for  the  Mexican  Central  later  repudiated 
the  Robinson  contract,  but  the  development  of  the 
Mexican  oil  fields  had  been  begun,  and  it  has  never 
stopped  from  that  day  to  this. 

It  was  in  1905  that  I  first  visited  Tampico.  I 
was  the  guest  of  Mr.  Robinson,  and  as  we  looked 
out,  one  day,  over  the  marshes  along  the  river 
which  runs  past  Tampico  to  the  sea,  six  miles 
away,  he  told  me  of  his  dreams  for  his  port,  of  the 


202  TRADING  WITH  MEXICO 

day  when  not  only  the  Tampico  side  of  the  river, 
but  the  barren  jungle  on  the  other  bank  would  be 
lined  with  wharves  and  great  steamers,  greater 
than  any  of  the  coasters  and  tramps  that  to  the 
number  of  half  a  dozen  a  month  were  then  carry- 
ing coal  and  ore  and,  amusingly  enough  as  we 
look  back  on  it  now,  crude  oil  from  Pennsylvania 
for  use  in  Tampico 's  one  industrial  establishment, 
the  Waters-Pierce  Refinery. 

I  visited  Tampico  twice  again,  the  last  time  in 
1908.  And  then  this  year !  It  was  as  if  the  dream 
of  the  builder  of  the  port  had  come  true  since  the 
setting  of  yesterday's  sun.  To-day  the  river  is 
lined,  from  its  mouth  all  the  six  miles  to  Tampico 
and  above,  with  wharves  and  warehouses  and  hun- 
dreds of  great  tanks  of  oil,  and  throughout  all  this 
length  are  ships,  tankers  and  cargo  boats,  while 
on  the  hills  above  are  refineries  and  modern  towns, 
and  at  night  the  lights  are  like  those  of  great 
cities.  The  dream,  indeed,  of  a  builder  of  civiliza- 
tion, of  civilized  Mexico,  has  apparently  come  true. 

A.  A.  Robinson  is  gone,  laid  away  with  his 
honors  and  his  vision  these  four  years.  But  still 
there  is  that  other  American,  who  twenty  years 
ago  rode  off  into  the  jungles  of  the  coastal  plain, 
saw  with  his  own  eyes  the  thick,  slimy  puddles  of 
asphalt  at  Ebano,  and  there  drilled  his  first  wells. 
Years  later,  after  his  railway  contracts  were  abro- 
gated, seeking  lighter,  better  oils,  Mr.  Doheny 


ROMANCE  OF  MEXICAN  OIL        203 

went,  with  the  frontiersman's  unquenchable  opti- 
mism, nearly  a  hundred  miles  farther  into  the 
jungle  till  he  heard  the  unforgettable  baby  mur- 
mur and  saw  the  unforgettable  bubbling  spring  of 
viscous  black  oil  of  the  great  seepages  of  Cerro 
Azul,  and  there  located  what  was  to  become  the 
greatest  oil  well  in  the  history  of  the  world,  the 
Cerro  Azul  No.  4. 

Oil  is  the  most  fascinating  of  all  the  treasures 
of  earth.  No  geologist  has  ever  approached  the 
solution  of  either  its  source  or  the  contours  or 
formations  within  which  it  lies.  An  oil  spring 
such  as  that  wonderful  bubbling  pool  at  Cerro 
Azul  may  mean  the  presence  of  a  great  reservoir 
of  oil  directly  beneath  or  it  may  mean  that  the  oil 
has  come  a  dozen  or  fifty  or  a  hundred  miles  along 
a  crack  in  the  mother-rock.  Experience,  faith,  in- 
tuition, these  determine  the  location  of  a  well.  It 
was  these  factors  that  Doheny  brought  with  him 
to  Mexico,  for  the  fields  which  he  finally  drilled 
and  proved  had  been  rejected  by  many  geologists 
before  he  came  and  after. 

At  Ebano,  a  way-station  on  the  Mexican  Cen- 
tral a  few  miles  inland  from  Tampico  this  pioneer 
of  the  Mexican  oil  fields  found  his  oil  and  de- 
veloped it,  and  his  success  brought  hundreds  of 
other  prospectors  to  Ebano  in  1900-1902.  But 
Ebano  oil  is  heavy  with  asphalt,  and  it  was  dan- 
gerous to  handle  in  the  crude  burners  of  the  time 


204  TRADING  WITH  MEXICO 

because  its  fumes  ignite  at  low  temperatures. 
Thus,  although  it  is  rich  in  lubricating  oils,  it  was 
not  the  petroleum  which  the  world  wanted  in  that 
day.  With  his  contract  with  the  Mexican  Central 
abrogated,  virtually  without  a  market  excepting 
for  asphalt  paving  in  Mexican  cities,  Doheny 
turned  southward  in  search  of  lighter  oils. 

His  trips  into  the  swamps  and  forests  of  the 
huasteca  or  coastal  plain  led  him  to  the  great  see- 
pages at  Cerro  Azul,  sixty  miles  below  Ebano.  It 
also  took  him  to  Juan  Casiano  where  he  located 
his  first  wells  and  in  1908  opened  the  first  of  the 
great  producing  pools  of  the  Tuxpam  district. 
Drilling  and  exploration  went  han^  in  hand  and 
not  only  Doheny  but  the  British  interests  of  Sir 
Weetman  Pearson  (now  Lord  Cowdray)  and  other 
American  companies  began  to  make  this  field 
famous. 

Since  that  time  the  story  of  the  Tampico  oil 
fields  has  been  the  story  of  the  Americans  and 
other  foreigners  who  followed  them.  No  Mexican 
name  and  no  Mexican  interest  are  connected  with 
the  vast  development  which  has  come.  Yet  so  vast 
is  the  busy  zone  of  production,  so  tremendous  and 
so  varied  the  forces  and  elements  working  there, 
that  one  feels  something  false  in  this  appearance 
of  preponderance  of  individuals  and  of  foreigners 
in  the  epochal  industry  of  Mexico.  When,  how- 
ever, one  glimpses  the  long  diplomatic  struggle, 


ROMANCE  OF  MEXICAN  OIL        205 

the  legal  tangle,  the  endless  problems  which  make 
the  Mexican  oil  question  so  complicated,  one  finds 
that  in  every  phase  there  are  always  only  these 
foreigners  on  the  one  side  and  the  predatory, 
scheming  Mexican  revolutionary  leaders  on  the 
other.  Never  is  there  a  Mexican  on  the  produc- 
tion side,  never  a  foreigner  on  the  side  of  the  ele- 
ments which  retard  production. 

It  was  Mr.  Robinson  who  opened  up  Mexican  oil, 
and  it  was  Doheny  and  other  early  foreigners  who 
first  dared  drill,  and  the  foreigners  alone  who  in 
the  years  past  have  dared  to  put  millions  into  pipe 
lines,  storage  tanks  and  wonderful  fleets  of  oil- 
carrying  ships.  Only  they  dared  or  would  dare  to 
go  into  the  sleepy  villages  of  the  Vera  Cruz  plains 
and  pay  fifty  cents  a  day  to  peons  who  had  lived 
for  generations  on  less  than  a  quarter  as  much. 
Only  the  foreigners  dared  give  their  labor  a  de- 
cent wage,  dared  teach  their  men  to  be  worth  more 
and  more  until  to-day  they  pay  the  commonest 
peon  the  equivalent  of  two  American  dollars  a 
day.  Only  these  foreigners  dared  believe  in  Mex- 
ico, dared  insist  on  the  good  faith  of  all  her  faith- 
less governments,  dared  to  go  on  with  their  work 
when  all  else  in  Mexico  stagnates  and  cringes  be- 
fore the  continuing  revolutions. 

And  on  the  other  hand  are  the  Mexicans  who 
govern  thejland,  making  it  their  chief  business  to 
bait  and  loudly  curse  these  same  foreigners.  The 


206  TRADING  WITH  MEXICO 

name  of  the  foreign  oil  men  is  anathema  in  Mexico 
to-day,  and  the  busiest  game  of  any  Mexican  offi- 
cial is  the  oratorical  denouncing  of  the  sponsors 
of  the  industry.  But,  we  cannot  forget,  these 
Mexicans  have  not  and  do  not  turn  a  finger  to  the 
replacing  of  great  foreign  activity  by  any  con- 
structive form  of  Mexican  enterprise. 

At  basis  the  difficulties  of  the  oil  companies  and 
the  Mexican  governments  are  psychological — and 
an  understanding  of  those  psychological  bases  is 
the  rarest  flower  in  the  intellectual  nosegay  of 
most  of  those  who  discuss  either  Mexico  or  oil. 
First  of  all  is  the  companies '  belligerent  insistence 
on  the  principles  of  vested  rights  as  the  first  and 
only  basis  for  the  oil  discussion — naturally  dis- 
tasteful to  those  whose  single  idea  is  to  upset 
those  rights.  Another  psychological  element  is 
that  the  foreigners'  very  respect  for  law  and  the 
continuity  of  government  and  their  insistence  that 
Mexico  live  up  to  their  own  ideals  is  in  the  first 
place  quite  beyond  the  conception  of  the  Mexicans 
in  power  to-day  and  in  the  second  place  such 
an  attitude  is  inevitably  maddening  to  the  weaker 
brother  whom  it  seeks  to  benefit.  Because  the 
foreigners  believe  in  Mexico,  the  Mexicans  will 
not  believe  in  the  foreigners. 

Another  disturbing  factor  is  the  very  success 
of  the  oil  companies  and  of  the  foreigners  whom 
they  employ.  I  have  told,  above,  something  of  the 


ROMANCE  OF  MEXICAN  OIL        207 

picture  of  the  Tampico  that  was  and  of  the  Tam- 
pico  that  is.  It  has  changed  in  yet  other  ways,  and 
most  of  all  in  the  makeup  of  her  population. 

In  1908  there  were  perhaps  two  score  Americans 
and  English  in  the  town,  and  the  chief  industry  of 
the  place  was — tarpon  fishing!  To-day  there  are 
8,000  Americans  and  a  thousand  British  and 
Dutch,  and  the  swaggering,  free-money,  noisy, 
busy  atmosphere  of  the  frontier,  of  the  oil  fields, 
of  the  white  man  on  his  bully-ragging,  destructive, 
inconsequential  "education"  of  the  dark  brother 
round  the  world,  permeates  the  place.  Its  influ- 
ence is  not  academic,  but  somehow  one  feels  that 
Tampico  is  a  monument  to  the  genius  and  faith 
of  the  Americans  who  made  it  great.  The  restless 
power  is  there,  the  restless  making  over  of  the 
world  that  it  may  be  a  better  place  for  the  white 
youth  of  the  future  to  stamp  about  in,  for  the  dark 
brothers  to  build  their  new  homes  in. 

Yet  strangely  enough,  if  you  will,  it  is  to  my 
mind  largely  because  of  this  same  energy,  the 
achievement  which  this  spirit  indicates  and  predi- 
cates, that  the  difficulties  of  the  foreign  oil  com- 
panies in  Mexico  have  been  the  sort  they  are. 
Their  persecution  has  sprung  from  the  realization 
of  the  Mexicans  that  these  Americans,  these  En- 
glish, these  Dutch,  are  doing  in  Mexico  and  for 
Mexico  what  Mexicans  can  not,  dare  not,  do.  The 
Mexicans  from  generals  to  peons,  are  frantic, 


208  TRADING  WITH  MEXICO 

baffled,  rabid,  at  the  wretched  Gringoes  who  dare 
to  pour  their  millions  out  to  drill  wells,  to  build 
pipe  lines  and  terminals  and  ships,  to  take  and  to 
convert  this  black  and  liquid  gold  from  the  soil  of 
Mexico. 

Of  the  hundreds  of  wells  drilled  in  the  Tampico- 
Tuxpam  fields,  some  of  them  the  veriest  "wild- 
cats ' '  on  the  flimsiest  of  chances,  hundreds  of  them 
as  sure  as  opening  a  bank  vault,  only  a  half  dozen, 
and  none  a  "wildcat,"  have  been  drilled  by  Mexi- 
cans as  individuals  or  in  corporations,  and  not  a 
single  ship,  not  a  single  storage  tank,  not  a  mile  of 
pipe  line,  is  Mexican.  Were  the  Mexican  govern- 
ment to  take  over  the  administration  of  the  oil 
fields  to-day,  drilling  would  cease  utterly,  to-mor- 
row development  would  stop  and  when,  a  year 
hence,  it  became  vital  to  open  more  wells,  the  event 
would  be  marked  by  government  ceremonies  and 
stifling  graft. 

Every  one  who  knows  Mexico  knows  that  this  is 
the  truth.  The  Mexicans  themselves  know  it,  and 
from  the  Tampico  policeman  who  howls  in  out- 
raged anger  when  an  American  motorist  refuses 
to  be  disturbed  by  official  anathemas,  up  to  the 
presidential  secretaries  who  devise  complicated 
and  childish  schemes  to  force  the  oil  companies 
into  recognizing  the  dignity  of  Mexican  sover- 
eignty, the  whole  attitude  toward  the  oil  business 
has  been  fraught  with  effort  to  maintain  that  hazy 


ROMANCE  OF  MEXICAN  OIL        209 

halo  of  the  weakling,  delicate  "  sensitiveness, "  na- 
tional pride,  amour  propre. 

When  I  left  New  York  to  study  Mexican  prob- 
lems for  the  present  writing,  I  was  convinced  that 
the  full  facts  of  the  case,  on  both  sides,  were  to  be 
found  in  the  United  States ;  Washington  was  in- 
deed the  battle  ground  of  lawyers  and  diplomats. 
Not  until  I  reached  Tampico,  however,  not  until  I 
went  out  to  the  oil  fields,  did  I  realize  that  the  real 
problem  is  not  the  question  of  diplomatic  contro- 
versy or  commercial  adjustment.  There,  on  the 
long  roads,  where  but  one  peon  of  all  the  thou- 
sands whom  we  passed,  took  off  his  hat  to  the 
white  patrones,  as  every  one  would  have  done 
twelve  years  ago,  I  found  the  touchstone.  I  knew 
then  why  reason  will  not  prevail,  why  justice  is 
non-existent,  why  no  white  man  has  yet  been  able 
to  feel  firm  ground  beneath  his  feet  in  the  discus- 
sion of  the  oil  problems.  These  problems  have  had 
their  rights  and  wrongs,  as  we  shall  see,  but  I 
think  that  the  great  difficulty  we  at  home  have  had 
in  believing  that  our  own  people  could  be  right 
has  been  our  inability  to  conceive  how,  being  right, 
the  Mexicans  could  be  so  hostile  to  them. 

This,  I  think,  is  the  point  of  departure  in  our 
misunderstanding  of  the  Mexican  situation,  espe- 
cially as  it  applies  to  oil.  Mexican  jealousy  and 
Mexican  realization  of  the  weakness  of  the  na- 
tional psychology  in  great  enterprise  have  set 


210  TRADING  WITH  MEXICO 

Mexico  frantic  with  the  success,  the  triumph,  the 
apparent  imperturbability  of  the  great  foreign 
oil  companies.  This  alone  has  made  their  hos- 
tility to  the  American  drillers,  linemen  and  en- 
gineers who  night  and  day,  month  after  month 
through  the  years  of  the  war,  kept  the  lines  open, 
the  oil  flowing.  Unarmed,  and  slaughtered  by  the 
score  from  ambush,  grim,  unkempt,  often  happily 
drunk  in  town,  these  frontiersmen  added  their  bit 
to  the  fire,  to  be  sure.  But  note  this — it  was  not 
the  white  man's  rough  assertion  of  superiority 
or  the  companies'  "tactless  insistence,"  but  the 
Mexican's  conception  of  his  own  inferiority,  per- 
•sonal,  commercial,  political,  which  lit  the  flame  and 
kept  it  burning. 

The  world  has  entered  upon  a  new  industrial 
era,  the  age  of  petroleum.  The  commercial  strug- 
gle is  to-day  not  the  war  for  markets,  but  the  race 
for  oil  lands.  And  of  all  the  petroleum  fields 
known  to  exist,  those  in  Mexico  are  the  greatest 
in  actual  production,  the  greatest  in  potential  ex- 
tent, and  the  most  favorably  situated  for  distri- 
bution— all  vivified  by  the  greatest  individual  oil 
wells  in  the  records  of  the  world. 

The  story  of  the  development  of  that  oil  field  is 
linked  with  the  history  of  Mexico,  inexorably,  in- 
evitably a  part  of  it,  influencing  it,  all  but  domi- 
nating it. 

The  first  oil  well  in  Mexico  was  brought  in  in 


ROMANCE  OF  MEXICAN  OIL        211 

1900;  production  began  on  a  commercial  scale  in 
1903;  about  1904  a  British  company  secured  its 
first  " concession "  for  oil  drilling;  in  1905  the 
status  of  petroleum  as  belonging  to  the  owner  of 
the  surface  land  was  definitely  settled,  and  de- 
velopment began  on  a  large  scale;  in  1912  the 
Madero  government  established,  over  the  mild  pro- 
tests of  the  producing  companies,  the  principle  of 
special  taxation  on  the  oil  business ;  in  1914  Presi- 
dent Huerta  extracted  200,000  Mexican  pesos  from 
an  American  oil  representative  in  Mexico  City, 
and  the  oil  company,  under  advice  of  the  Depart- 
ment of  State,  repudiated  his  draft  and  paid  the 
money  to  Carranza;  in  1914  the  principle  of 
"shaking  down"  the  oil  companies  was  originated 
by  Candido  Aguilar  (later  son-in-law  of  Car- 
ranza), who  made  a  mild  $10,000  collection;  in 
1915  Manuel  Pelaez  made  his  first  call  for  tribute, 
some  $1,500,  under  the  exchange  conditions  of  the 
day,  which  the  companies  paid  with  the  advice  of 
the  American  State  Department  and  the  American 
Ambassador,  a  precedent  which  later  netted  Pelaez 
a  regular  $30,000  a  month;  in  1915  Carranza  be- 
gan to  devote  the  brains  of  his  finance  minister, 
Luis  Cabrera,  to  devising  oil  taxes,  with  the  result 
that  to-day  the  foreign  oil  companies  pay  a  total 
of  nearly  $4,000,000  a  month,  derived  from  export 
taxes  on  the  product,  stamp  taxes  on  their  busi- 
ness, occupation  taxes  on  their  offices,  harbor  taxes 


212  TRADING  WITH  MEXICO 

on  their  ships,  customs  duties  on  their  supplies, 
etc. ;  in  1916  Carranza  issued  the  decree  requiring 
foreigners  who  did  business  in  Mexico  to  renounce 
their  rights  of  recourse  to  their  home  government ; 
in  1917  came  the  new  Mexican  constitution  declar- 
ing all  petroleum  in  the  subsoil  the  property  of  the 
nation;  in  1919  the  drilling  of  new  wells  was 
stopped  unless  the  companies  agreed  to  accept  this 
principle  of  nationalization ;  in  1919  the  second  of 
the  big  oil  pools  went  to  salt  water  and  the  need 
of  new  drilling  to  keep  up  the  supply  of  oil  (and 
the  Mexican  taxes)  became  imperative;  in  Janu- 
ary, 1920,  temporary  drilling  permits  were  issued 
by  Carranza;  in  May,  1920,  Carranza  was  over- 
thrown and  murdered  in  the  revolution  of  Obre- 
gon,  said  to  have  been  financed  by  certain  oil  in- 
terests; in  1921  Obregon  doubled  the  oil  taxes, 
bringing  about  a  shutdown,  temporary  but  salu- 
tary; in  1921  drilling  is  going  on,  however,  and 
the  shipment  of  oil  continues. 

While  drilling  is  going  on  in  small  sections  in 
spite  of  obstacles,  the  full  development  of  the  pe- 
troleum fields  of  Mexico  waits  on  the  final  decision 
of  the  confiscatory  provisions  of  Carranza,  whose 
dead  hand  still  guides  the  policies  of  his  succes- 
sors along  the  road  of  anti-foreignism.  In  1921, 
then,  the  oil  companies  are  still  uncertain  of  their 
status,  still  the  objects  of  astonishing  taxation, 
still  subject  to  government  annoyance  and  graft, 


ROMANCE  OF  MEXICAN  OIL        213 

still  buying,  in  taxes  and  annoyances,  the  "  privi- 
lege "  of  working  their  properties. 

The  plants  of  the  foreign  companies  are  proba- 
bly the  greatest  installation  in  any  single  oil  field 
in  the  world.  The  investment  in  pipe  lines,  pump- 
ing stations,  storage  tanks,  refineries,  terminals 
and  ships  represents  close  on  $750,000,000;  the 
length  of  the  161  pipe  lines  (practically  all  of  them 
eight  or  ten  inches  in  diameter)  totals  nearly  1,000 
miles,  while  nearly  1,500  steel  tanks,  with  a  capac- 
ity of  60,000,000  barrels,  furnish  enough  storage 
to  fill  a  thousand  ships.  Through  the  pipe  lines 
can  pass,  under  high  pressure,  750,000  barrels  a 
day,  although  the  average  production  for  1920  was 
about  half  of  this  amount. 

In  the  Mexican  fields  in  April,  1920,  the  latest 
date  for  which  figures  are  available,  there  were 
304  wells  in  production,  148  located  and  123  drill- 
ing. The  total  of  commercially  unproductive  wells 
to  that  date  was  464,  including  only  35  which 
showed  oil  in  too  small  quantities.  Three-fifths 
of  all  the  wells  drilled  in  Mexico  have  been  dry 
holes,  and  to-day  of  1,113  wells  drilled  and  pro- 
jected, only  75  which  have  actually  flowed  oil  have 
run  out  of  production.  These  last,  however,  in- 
clude some  of  the  greatest  in  the  history  of  the 
petroleum  industry. 

The  vast  investment  and  plant  in  the  Tampico- 
Tuxpam  fields  produced  in  1920  over  140,000,000 


214  TRADING  WITH  MEXICO 

barrels  of  oil,  one-fourth  of  all  that  was  produced 
in  the  entire  world,  equaling  some  40  per  cent  of 
the  production  of  all  the  fields  in  the  United 
States.  The  1920  production  was  nearly  five 
times  that  of  1913,  when  less  than  26,000,000  bar- 
rels were  extracted  from  the  Mexican  wells,  and 
when  Mexico 's  total  oil  output  was  only  one-ninth 
that  of  the  United  States  and  contributed  less 
than  one-twelfth  to  the  production  of  the  world. 
The  growth  has  been  steady  and  by  tremendous 
strides,  for  when  the  pressure  of  war  was  on,  the 
men  who  were  taking  out  Mexican  oil  built  up  a 
production  which  between  1916  and  1917  brought 
an  increase  of  40  per  cent  and  began  a  develop- 
ment that  despite  superhuman  difficulties  gained 
such  momentum  that  between  1919  and  1920  the 
increase  was  60  per  cent. 

On  your  map  you  will  easily  find,  on  the  eastern 
shore  of  Mexico,  the  city  of  Tampico,  located  in 
the  center  of  the  palm  of  the  hand  with  which 
Mexico  grasps  the  great  Gulf.  A  little  to  the 
south  you  will  find,  with  difficulty,  the  town  of 
Tuxpam,  midway  between  Tampico  and  Vera 
Cruz.  From  Tampico  directly  south  to  a  few 
miles  west  of  Tuxpam  runs  the  "line"  along 
which  lies  virtually  all  the  oil  yet  developed  in 
commercial  quantities  in  Mexico.  The  "line"  is 
thirty-five  miles  long;  the  great  producing  terri- 
tory never  extended  over  twenty  miles;  momen- 


ROMANCE  OF  MEXICAN  OIL        215 

tarily  the  section  which  is  giving  the  oil  of  the 
Tuxpam  district  is  along  ten  miles  in  the  middle 
of  the  "line" — and  the  territory  is  hardly  a  half 
mile  broad  at  its  greatest  width.  This  section  pro- 
duced in  the  past  ten  years  500,000,000  barrels  of 
oil.  In  1920  it  produced  about  140,000,000  barrels, 
close  to  one-quarter  of  all  the  oil  taken  from  all 
the  wells  in  the  world. 

Now  trace  the  "line"  north  to  Texas  and  Okla- 
homa— it  is  an  extension  of  the  great  mid-con- 
tinent field  of  the  United  States.  Now  go  south, 
through  the  old  Furbero  field,  swing  a  little  in  to- 
ward the  Gulf,  and  south  of  Vera  Cruz,  on  the 
Isthmus  of  Tehuantepec,  you  will  find  Mlnatitlan, 
the  site  of  early  drillings,  and  of  the  refinery  of 
the  Mexican  Eagle  Oil  Company.  Still  south,  on 
the  "line,"  and  you  will  find,  if  your  map  is  large 
enough,  the  village  of  Macuspana,  in  the  state  of 
Tabasco.  Here  oil  of  a  grade  so  fine  that  the  na- 
tives burn  the  crude  seepage  in  their  lamps  has 
been  oozing  through  the  soil  for  centuries,  and 
here,  long  ago,  the  British  drilled  many  test  holes. 
The  "line"  runs  true,  skirting  the  Gulf  of  Mexico. 

Still  more.  There  are  oil  seepages  on  the  West 
Coast,  an  extension,  perhaps,  of  our  California 
fields.  Other  indications  have  been  found,  even 
far  inland,  and  indeed  on  the  Gulf  side,  the  "line" 
does  not  by  any  means  cover  the  seepages,  even 
of  the  coastal  plain.  All  this  section,  off  into  the 


216  TRADING  WITH  MEXICO 

interior  toward  the  states  of  Puebla  and  Hidalgo, 
has  been  leased  for  oil.  But  production  sticks  to 
the  "  line. " 

The  Tuxpam  field,  the  heart  of  the  "line,"  will 
ultimately  go  to  salt  water.  Of  this  there  is  no 
question.  Every  pool  of  oil  that  has  been  drained 
— now  three  in  number — has  given  its  100,000,000 
barrels,  and  the  steaming,  brackish  water,  still 
under  terrific  pressure,  has  wiped  out  the  prop- 
erty, often  between  sunset  and  sunrise — a  few 
hours  between  50,000  barrels  a  day  and  nothing. 
Dos  Bocas  at  the  northernmost  end  of  the  "line," 
came  in  on  July  4, 1906,  hailed  as  the  greatest  well 
of  history,  blew  out  her  casing,  caught  fire  and 
burned  for  months,  a  torch  of  gas  and  flame  850 
feet  high,  till  (if  it  was  oil  and  not  gas  she  burned) 
she  had  easily  spent  her  100,000,000  barrels.  An- 
other great  British  well,  Portrero  del  Llano  No. 
4,  flowed  eight  years,  giving  nearly  her  100,000,000 
to  industry,  and  went  to  salt  water  over  night. 
The  Casiano  field,  of  the  Doheny  interests,  paid  a 
similar  toll.  Cerro  Azul  No.  4  of  the  same  com- 
pany came  in  at  a  full  rate  of  162,000  barrels  a 
day.  She  has  never  been  allowed  to  flow  full,  for 
the  whole  field  is  owned  by  the  company,  and  the 
pool  is  considered  safe  from  drainage.  Further 
south,  the  Doheny  companies  have,  in  1921,  opened 
another  vast  field,  the  Chapapote  Nunez — but  that, 
still,  is  "on  the  line." 


ROMANCE  OF  MEXICAN  OIL        217 

During  the  past  year  the  Naranjos  field  has  been 
showing  salt  water;  the  Chinampa,  with  a  hun- 
dred wells  located  on  a  relatively  few  acres,  is 
being  drained  at  top  speed,  and  salt  water  has 
been  cutting  closer  in  at  its  edges.  To-day  the 
Zacamixtle  camp,  the  last  of  the  "line,"  which 
was  drilled  like  mad  by  scores  of  crews  putting 
down  wells  that  cost  in  Mexico  $100,000  each,  has 
been  narrowed  to  a  strip  of  an  oil  river  only  a 
few  hundred  yards  wide. 

With  Chinampa  and  Zacamixtle  gone,  only  the 
Cerro  Azul,  the  sixty  square  miles  of  the  Chapa- 
pote  field,  and  the  adjacent  Toteco  pool  will  re- 
main on  the  "line"  with  no  reserves  save  to  the 
south,  in  a  territory  recently  proved  by  the 
"Toteco"  and  "Chapapote"  districts,  or  to  the 
north,  in  the  Tampico  or  Panuco  field  proper. 
This  last  is  a  heavy  oil  section,  and  here,  too,  the 
largest  portion  of  the  territory  is  owned  by  the 
Doheny  companies. 

Why,  with  this  dwindling  field,  this  steady  re- 
duction in  reserves,  has  there  not  been  more  de- 
velopment in  Mexico?  You  know  the  basic  an- 
swer— revolution.  But  through  revolution  and 
graft  and  theft  and  murder  the  American  opera- 
tors in  the  oil  fields,  working  for  British  and 
American  companies,  have  kept  on  the  job.  Revo- 
lution is  not  the  only  answer. 

Carranza,  when  he  became  president  of  Mexico, 


218  TRADING  WITH  MEXICO 

cast  envious  eyes  toward  the  oil  fields,  and  sought 
to  make  them  his  own,  for  loot  and  for  graft,  and 
not  for  conservation,  be  it  noted  here.  He  "  na- 
tionalized "  petroleum,  by  his  new  constitution, 
and  tried  to  force  the  companies  to  give  up  their 
properties.  They  did  not  surrender,  in  fact  or 
in  principle,  and  for  five  years  have  fought  for 
their  rights,  and  for  what  they  believe  is  the  hope 
of  oil  development  in  all  the  backward  lands  of  the 
globe. 

In  1919  Carranza  stopped  the  drilling  of  new 
wells,  in  an  effort  to  force  the  companies  to  submit 
to  his  decrees,  and  not  until  Tepetate  and  Juan 
Casiano  went  to  salt  water  and  the  tax  returns  of 
nearly  $30,000,000  a  year  (at  that  time)  were 
direly  threatened,  did  he  give  temporary  permits 
for  drilling.  He  might  fight  for  the  nationaliza- 
tion of  the  oil,  but  he  was  routed  by  the  danger 
to  the  vast  sum  upon  which  he  ran  his  government 
and  upon  which  his  generals  and  favorites  fat- 
tened and  grew  rich. 

Thus  in  the  oil  fields  drilling  has  been  resumed. 
But  off  the  "line"  there  is  virtually  no  drilling, 
none  of  the  "wild-catting"  which  is  the  life  of  the 
oil  industry.  Until  the  new  government,  if  it  ever 
does  of  its  own  free  will,  loosens  the  death-grip 
of  Carranza,  the  oil  industry  will  remain  para- 
lyzed and  confined  to  its  narrow,  shrinking  bed  be- 
tween Tampico  and  Tuxpam. 


ROMANCE  OF  MEXICAN  OIL        219 

But  why  does  Mexico  go  on?  Why  does  she  see 
so  little  of  the  way  before  her?  The  situation  is 
complicated  by  many  factors,  two  of  which  stand 
out  in  relief.  These  are  the  support  given  the 
Carranza  ideas  first  by  the  British  companies  and 
second  by  some  new  American  companies.  The 
British  needs  in  Mexico  have  from  time  to  time 
been  identical  with  the  American,  and  then  the 
two  have  worked  together,  but  the  British  occupy 
a  peculiar  position,  going  back  to  the  Madero  revo- 
lution of  1910-11.  At  that  time  the  Mexican  Eagle 
company  (which  is  a  Mexican  corporation)  was 
caught  with  a  number  of  the  old  Diaz  "  reaction- 
aries" as  its  company  officials,  and  it  was  also  the 
holder  of  the  hated  Diaz  "concessions."  As  a 
result  it  had  to  walk  the  chalk  line  very  carefully 
under  both  Madero  and  Carranza,  a  condition 
which  has  always  made  its  position  weaker  than 
the  American.  The  large  local  business  of  the 
Eagle  Company,  in  refined  gasoline  and  oils,  as 
well  as  in  fuel  oil,  has  also  complicated  the  matter. 
It  was  due  to  these  and  similar  factors  that  the 
Eagle  Company  placed  itself  under  the  "protec- 
tion" of  the  Carranza  decrees  when  they  were 
first  issued,  although  with  protests,  both  legal  and 
diplomatic.  With  a  single  American  exception, 
the  English  interests  were  the  only  ones  which 
gave  any  conjfort  to  those  early  Carranza  plans. 
Upon  their  support  the  former  president  built 


220  TRADING  WITH  MEXICO 

many  of  his  subsequent  activities,  including  the 
ruling  on  drilling  permits.  He  gave  these  permits 
to  the  Eagle  Company  without  conditions,  at  the 
very  time  withholding  them  from  the  "un- 
friendly" Americans  under  a  demand  for  a  writ- 
ten waiver  of  all  protest  against  future  petroleum 
legislation. 

The  second  form  of  support  which  the  Mexican 
governments  obtained  is  more  recent,  and  more 
complicated.  Under  the  Carranza  decrees  oil 
lands  were  open  to  "denouncement"  (or  filing  of 
claims)  and  the  taking  out  of  a  "denouncement" 
even  to  protect  one's  own  property  was  taken  as 
an  unqualified  recognition  of  the  right  of  Mexico 
in  confiscating  the  oil  rights  of  that  property. 
The  American  and  British  companies  united  in 
an  agreement  not  to  denounce  their  own  lands  and 
not  to  buy  or  lease  denouncements  upon  any  other 
lands. 

In  1919,  some  new  American  interests,  which 
had  had  other  experience  in  oil,  entered  the  Mex- 
ican field.  They  spent  some  $500,000  in  looking 
up  titles  to  the  properties  and  leases  held  by  the 
old  companies.  They  found  many  defects,  for  the 
inheritance  laws,  the  poor  records  and  the  negli- 
gible value  of  the  properties  as  farm  lands  make 
questionable  titles  the  commonplace  of  the  oil 
game  in  Mexico.  Where  there  was  an  apparently 
defective  title,  these  interests  acquired  the  out- 


KOMANCE  OF  MEXICAN  OIL        221 

standing  lien,  and  so  laid  claim  to  some  of  the 
finest  producing  lots. 

So  far  the  plan  was  a  not  unexpected  move  to- 
ward getting  a  hand  in  the  oil  game,  a  chance  to 
sit  in  with  big  stakes  alongside  the  big  companies. 
The  new  elements,  however,  next  "denounced" 
their  new  claims  before  the  Carranza  government, 
thus  placing  themselves  quite  outside  the  old- 
crowd  oil  camp.  This  "denouncing"  of  their 
properties  brought  them  many  favors  from  Car- 
ranza officials,  but  it  made  negotiation  with  the 
old  companies  difficult. 

The  Mexican  oil  problem,  in  its  simplest,  is 
three-fold.  It  has  to  do,  first,  with  the  nationaliza- 
tion of  the  petroleum  in  the  subsoil,  which  threat- 
ens to  wipe  out  vested  property ;  second,  with  the 
question  of  taxation,  which  may  at  any  time,  and 
indeed  actually  threatens  to  become  confiscatory; 
third,  with  the  problem  of  concessions  which  are 
to-day  the  most  obvious  form  of  political  graft  and 
to-morrow  may  precipitate  a  Mexican  war  over 
petroleum  rights. 

First,  the  nationalization  of  petroleum.  The 
Constitution  of  1917,  adopted  by  Carranza,  and 
continued  by  de  la  Huerta  and  Obregon,  definitely 
declares  petroleum  the  property  of  the  nation.  In 
the  grants  of  land  made  by  the  Spanish  crown, 
(the  basis  of  all  land  titles  in  Mexico  to-day),  gold, 
silver  and  other  metals  were  especially  reserved 


222  TRADING  WITH  MEXICO 

as  the  property  of  the  king,  and  in  colonial  times 
and  since  have  been  worked  only  by  special  per- 
mission or  grant  under  " denouncement,"  quite 
independently  of  the  owner  of  the  land.  Neither 
coal  nor  oil  was  known  to  commerce  in  Spanish 
times,  but  in  1884,  when  the  mining  laws  were  re- 
vised, the  Mexican  government  as  inheritor  of  the 
rights  of  the  Crown  of  Spain  and  retaining,  as  it 
did  and  does,  the  royal  control  over  gold  and 
silver,  specifically  stated  that  coal  and  oil  be- 
longed to  the  owner  of  the  surface.  This  was  con- 
firmed later  in  the  mining  laws  of  1892.  In  1905, 
after  oil  was  discovered  and  certain  concessions 
for  drilling  had  been  issued  to  Sir  Weetman  Pear- 
son (now  Lord  Cowdray),  head  of  the  Mexican 
Eagle  Oil  Company,  an  effort  was  made  to  have 
oil  declared  the  property  of  the  nation,  like  gold 
and  silver,  and  thus  subject  to  concession  and  de- 
nouncement. This  was  opposed  by  the  American 
interests,  which  held  no  concessions.  The  issue 
was  decided  virtually  unanimously  by  the  Acad- 
emy of  Jurisprudence,  and  in  the  mining  laws  of 
1909  the  title  to  oil  was  definitely  and  unequivoca- 
bly  vested  in  the  title  to  the  surface  soil. 

Until  1917,  the  vast  development  of  Mexican 
oil  fields  went  on  apace,  based  on  the  old  property 
rights  and  apparently  safe  from  molestation. 
Carranza  switched  the  matter  completely  around 
by  the  simple  expedient  of  adding  oil  to  the  list 


ROMANCE  OF  MEXICAN  OIL        223 

of  minerals  which  are  national  property  and  plac- 
ing the  new  ruling  in  that  famous  Article  27 
which  contains  most  of  the  anti-foreign  provisions 
of  the  new  constitution. 

The  Mexican  defenses  of  this  action  are  two. 
The  primary  thesis  is  that  the  subsoil  has  always 
belonged  to  the  government,  whether  king  or  re- 
public, and  that  it  was  beyond  the  power  of  min- 
isters or  courts  or  legislatures  to  alienate  those 
rights.  In  other  words,  Mexico  is  only  "  taking 
back  her  own."  The  opposition  to  this  is  on  the 
basis  of  vested  rights,  on  the  long  periods  during 
which  the  owners  of  the  lands  had  actually  en- 
joyed possession  of  the  subsoil,  paying  taxes  on 
full  valuations,  and  on  the  virtual  obligation  of 
contract  of  all  Mexican  governments  to  support 
developments  under  the  laws  of  their  prede- 
cessors. 

The  other  contention,  more  general  and  yet  with 
a  stronger  appeal  to  modern  radicals,  was  that 
such  nationalization  was  in  line  with  the  trend  of 
the  times,  a  trend  later  manifested  in  the  Russian 
revolution.  Candido  Aguilar,  then  Carranza's 
foreign  minister,  gave  voice  to  this  phase  in  his 
note  of  August  12,  1918,  to  the  British  Foreign 
Office,  where  he  stated  that  "the  modern  concep- 
tion of  property  is  that  it  is  a  social  function 
bound  closely  to  the  prosperity  of  the  State." 

Both  these  contentions  might  in  fact  be  worthy 


224  TRADING  WITH  MEXICO 

of  consideration  if  the  government  of  Mexico  were 
of  a  character  to  be  trusted,  if  it  were  indeed  gen- 
uinely devoted  to  any  sincere  ideals  of  social  re- 
form, if  it  were  truly  interested  in  the  conserva- 
tion of  the  nation's  resources  for  the  benefit  of  the 
people.  But  the  Mexican  governments  have  been 
none  of  these  things,  truly  believe  none  of  these 
things.  The  radicalism  of  Mexico,  the  socialism 
of  Mexico,  are  means  to  an  end,  not  ends  in  them- 
selves, means  to  power  and  position,  for  loot  and 
for  the  pelf  which  goes  into  private  pockets  and 
not  even  into  national  coffers. 

Certainly  if  government  could  be  depended  on, 
the  idea  of  paying  fixed  royalties  to  a  national 
treasury  is  financially  preferable  to  dickering 
with  individuals,  and  obviously  more  businesslike. 
But  since  oil  has  been  known,  the  great  organiza- 
tions which  handle  the  product  have  been  accus- 
tomed to  dealing  with  private  owners ;  it  is  a  game 
they  know,  a  business  they  understand.  In  Mex- 
ico there  is  the  other  factor  which  one  can  never 
lose  sight  of,  and  that  is  that  government  control 
means  graft,  favoritism,  chicanery,  the  meddling 
of  foreigners  and  big  business  in  the  very  heart  of 
the  councils  of  government.  And  those  things, 
until  now  avoided,  must  never  come  into  being. 

In  the  final  analysis,  the  proposed  nationaliza- 
tion of  petroleum  has  never  been  a  conservation 
measure,  the  only  excuse  (to  radical  or  to  con- 


ROMANCE  OF  MEXICAN  OIL        225 

servative)  for  its  promulgation.  The  Mexican 
governments,  from  Carranza  to  Obregon,  ac- 
cepted "  denouncements "  upon  petroleum  lands 
already  developed,  granted  vast  concessions  for 
drilling,  on  a  royalty  arrangement  with  the  gov- 
ernment, in  so-called  navigable  streams  and  other 
"federal  zones,"  and  in  every  way  in  their  power 
carried  on  a  redistribution  of  petroleum  titles. 
This  single  fact  of  the  government  acceptance  of 
such  denouncements  and  concessions  indicates  that 
the  intention  is  not  to  conserve,  but  to  get  a  new 
deal  with  somebody  besides  the  Gringoes  and  the 
Indians  who  own  the  oil  lands  sitting  around  the 
table. 

The  whole  interpretation  of  the  oil  features  of 
Article  27  seems  at  variance  with  the  ideas  of 
genuine  radicals  as  completely  as  it  is  at  variance 
with  the  ideas  of  dyed-in-the-wool  conservatives 
who  still  dare  talk  of  "vested  rights. "  The  effect 
of  the  enforcement  of  the  nationalization  plan 
would  be  first  to  change  royalty  payments  from 
the  land  owners  to  the  government  and  second  to 
move  the  dealings  for  oil  leases  from  the  open  field 
and  the  negotiations  of  plain  buying  and  selling 
to  the  conferences  of  government  officials  where 
honor  is  to-day  a  -more  commercial  commodity 
than  land,  and  where  the  proportions  of  lease 
money  to  graft  would  be  as  one  to  ten.  It  would 
indeed,  bring  on  the  era  of  concessions  and  fa- 


226  TRADING  WITH  MEXICO 

voritism  with  a  vengeance,  and  the  dismal  pictures 
of  the  foreigners'  corruption  and  exploitation  of 
Mexico  would  become  a  bitter  reality. 

At  present,  the  chief  hope  of  avoidance  of  such 
a  condition  lies  in  Article  14  of  the  same  Consti- 
tution of  1917,  which  declares  that  none  of  the 
provisions  of  that  instrument  shall  be  construed  as 
being  retroactive.  The  interpretation  of  non- 
retroactivity  has  been  the  subject  of  much  discus- 
sion. At  one  time  Carranza's  foreign  minister 
told  the  oil  companies  that  it  should  be  understood 
to  mean  that  the  government  would  not  collect 
for  the  oil  already  extracted.  At  other  times  it 
has  been  held  that  the  expropriation  of  petroleum 
rights  would  not  affect  the  properties  where  wells 
were  opened  prior  to  May  1st,  1917;  then  not  to 
land  acquired  for  drilling  purposes  before  that 
date.  It  was  this  detail  which  was  taken  up  by  the 
Mexican  Supreme  Court  in  August,  1921.  But 
after  years  of  fighting  single  incidents,  an<? 
working  along  the  theory  that  American  com- 
panies could  demand  only  their  own  rights,  the 
issue  has  actually  broadened  to  the  whole  ques- 
tion of  property  rights  of  Mexicans  as  well  as  for- 
eigners. There  are  millions  of  acres  of  potential 
petroleum  land  in  Mexico,  not  one  per  cent  of 
which  is  owned  or  leased  by  foreigners,  and  all  this 
would  be  wiped  out,  along  with  foreign  properties, 
if  the  oil  were  declared  definitely  confiscated  to 


ROMANCE  OF  MEXICAN  OIL        227 

the  nation,  or  even  if  merely  the  "oil"  lands 
were  exempted. 

Were  non-retroactivity  interpreted  to  national- 
ize only  the  oil  and  coal  in  federal  lands  to  which 
no  title  had  ever  been  given  to  private  individuals, 
the  vested  rights  of  land  owners  would  be  pro- 
tected whether  petroleum  had  been  discovered  on 
the  property  or  not.  Such  an  idea  of  nationaliza- 
tion would  approximate  the  control  of  oil  in  na- 
tional lands  in  the  United  States  under  the  new 
leasing  laws.  It  is  this  interpretation  which  the 
oil  companies  and  the  Mexican  land  owners  are 
seeking,  and  which  has  not  been  touched  by  the 
Mexican  Supreme  Court  decisions  noted  above. 

The  second  issue  in  the  oil  controversy  is  taxa- 
tion. Until  the  1921  temporary  increase,  export 
duties  on  oil  were  collected  at  a  theoretical  rate 
of  15  per  cent  of  its  value.  This  valuation  is  sup- 
posedly on  the  basis  of  sales  of  oil  in  Mexico. 
There  are  hundreds  of  such  sales,  but  their  prices 
are  not  taken,  and  arbitrary  estimates  ostensibly 
based  on  the  prices  for  which  oil  is  sold  abroad, 
less  another  arbitrary  allowance  for  transporta- 
tion, are  the  criteria.  The  results  of  this  system 
have  been  confusing  to  the  exporters,  to  say  the 
least.  Some  of  the  lower  grades  of  oil,  for  in- 
stance, were  actually  paying,  not  15  per  cent  of 
their  value,  but  40  or  50  per  cent.  The  valuations 
fluctuate  also  according  to  government  caprice  and 


228  TRADING  WITH  MEXICO 

the  need  of  tax  money;  the  result  is  another  dif- 
ficulty in  making  close  prices  to  consumers,  which 
in  the  end  all  must  feel  in  the  price  of  gasoline. 
A  peculiar  tax  difficulty  of  the  oil  companies  was 
over  an  exact  doubling  of  the  valuations  and  thus 
of  the  taxes,  made  by  the  Carranza  government 
a  few  days  before  it  fell — an  increased  tax  which 
the  de  la  Huerta  and  Obregon  governments  have 
sought  to  collect.  Still  more  recent  is  the  virtual 
doubling  of  oil  taxes  which  shut  in  many  of  the 
wells  during  July,  1921. 

The  direct  oil  taxes  are  now  about  $2,000,000  a 
month,  so  that  the  doubling  is  an  item  of  no  small 
moment.  At  present  no  immediate  solution  of  the 
tax  difficulties  is  in  sight,  and  the  companies  have 
been  split  by  favoritism  into  two  camps.  One  is 
largely  British,  which  finds  it  profitable  to  accept 
the  decrees.  The  other  is  largely  American  and 
finds  the  enforcement  of  the  new  regulations  op- 
pressive. Some  plans  for  relief  have  been  dis- 
cussed. One  of  the  proposed  oil  bills  based  on 
Article  27  interprets  it  not  as  nationalizing  pe- 
troleum, but  as  nationalizing  the  right  of  taxation, 
taking  all  tax  privileges  from  the  states  and  vest- 
ing them  in  the  federal  power.  The  idea  would 
be  to  provide  a  single  direct  tax  on  petroleum  ex- 
tracted from  the  soil  instead  of  upon  that  exported. 
Apparently  this  tends  toward  a  solution  of  the  tax 
question.  But  here  again  enters  the  difficulty  of 


ROMANCE  OF  MEXICAN  OIL        229 

dealing  with  Mexicans,  for  such  a  direct  tax  would 
be  without  recourse,  until  its  provisions  became 
confiscatory,  while  at  present  the  companies  have 
at  least  a  chance  of  defense  in  protests  against 
arbitrary  valuations. 

The  outstanding  fact  in  the  tax  situation,  as  in 
the  nationalization  question,  is  the  bad  faith  of 
Mexican  government.  The  much  discussed  re- 
forms are  non-existent,  and  government  in  Mexico 
is  for  the  benefit,  not  of  the  governed,  but  of  those 
who  rule,  and  taxes  fill  not  the  treasury  but  the 
pockets  of  officials,  and  appropriations  are  not  for 
schools  and  civic  welfare,  but  for  the  army  and 
"public  works,"  where  graft  is  so  colossal  that  it 
passes  the  conception  of  citizens  of  simpler  lands. 

The  third  element  of  the  Mexican  oil  problem 
has  to  do  with  concessions.  This  is  a  phase  of 
nationalization,  but  to-day  it  has  taken  on  an  im- 
portance which  recently  obscured  other  issues. 
The  government  had  issued  a  number  of  what  are 
called  " federal  zone  concessions,"  giving  to  indi- 
viduals and  companies  the  right  to  explore  and 
extract  oil  from  the  rivers,  lakes,  etc.  The  federal 
zones  are  narrow  strips  along  the  seashore  and 
navigable  rivers  on  which  an  easement  has  been 
reserved  for  the  public  use.  The  American  oil 
companies  contend  that  this  mere  easement  can- 
not be  converted  into  absolute  ownership,  which 
is  the  effect  when  the  government  grants  to  third 


230  TRADING  WITH  MEXICO 

parties  the  right  to  drill  wells  there  and  thus  to 
tap  the  pools  of  oil  which  the  companies  have  dis- 
covered and  developed  and  on  which  they  are 
paying  rentals  to  land  owners. 

There  were  a  few  oil  concessions  under  Diaz, 
practically  all  to  English  companies.  One  of  the 
great  shibboleths  of  the  Madero  revolution  was  the 
wiping  out  of  the  system  of  concessions,  so  no 
more  were  given  until  toward  the  end  of  the  Car- 
ranza  regime.  Beginning  then,  becoming  almost 
an  orgy  in  the  brief  rule  of  de  la  Huerta,  and  con- 
tinuing into  the  days  of  Obregon,  concessions 
have  become  common,  some  going  indirectly  to 
a  few  American  companies,  many  to  the  British 
corporations  and  more  to  Mexican  favorites  of  the 
ruling  group.  The  concessions  issued  cover  prac- 
tically every  river  and  semi-arid  gully  (regarded 
as  a  "navigable  stream "  for  the  purposes  of  the 
concession)  in  the  whole  Tampico-Tuxpam  field,  a 
stretching  of  the  "federal  zone"  idea  in  order  to 
make  possible  the  penetration  of  the  producing 
fields  by  concessionaires. 

Other  concessions  are  of  different  sort.  Under 
de  la  Huerta  one  was  issued  giving  the  right  to 
explore  rivers,  lakes  and  government  lands  over 
the  entire  republic,  with  preferential  drilling 
rights  up  to  a  production  of  400,000,000  barrels 
per  year,  the  chief  consideration  being  a  return  to 
the  Mexican  government  of  40  per  cent  of  the 


ROMANCE  OF  MEXICAN  OIL        231 

gross  value  of  the  oil  found.  Another,  to  a  com- 
pany, also  American,  gives  rights  to  explore 
Lower  California  and  other  West  Coast  states, 
with  the  privilege  of  denouncing  not  only  govern- 
ment lands,  but  private  properties  as  well — the 
return  to  the  government  in  this  case  is  10  per 
cent  of  the  gross. 

The  concession  feature  of  the  oil  question,  like 
the  others  which  I  have  described,  has  its  rights 
and  its  wrongs,  but  the  fact  of  giving  concessions, 
and  in  such  blanket  form,  to  take  oil  from  the 
lands  of  private  property  holders,  is  in  itself  proof 
of  but  one  thing — the  intention  of  the  Mexican 
government,  not  to  conserve  its  resources  of  oil 
for  the  benefit  of  its  people  and  the  generations 
yet  unborn,  but  to  get  out  of  the  oil  business  as 
much  as  possible  as  quickly  as  possible — and 
solely  for  itself  and  its  favorites. 

The  final  phase  of  the  oil  problem  in  particular 
and  of  the  entire  Mexican  question  in  general  is 
anti-foreignism.  Article  27  of  the  new  constitu- 
tion contains  a  number  of  anti-foreign  provisions 
other  than  petroleum  nationalization.  One  is  that 
only  Mexican  citizens  may  develop  oil  (and  other 
properties)  in  the  republic.  Another  section  of 
the  Constitution,  as  I  have  mentioned,  gives  this 
provision  force  by  requiring  that  foreigners  who 
sought  to  work  such  properties  should  appear  be- 
fore a  government  department  and  waive  all 


232  TRADING  WITH  MEXICO 

rights  of  appeal  to  their  home  government  for 
protection.  This  and  other  anti-foreign  pro- 
visions are  summed  up  in  the  so-called  * '  Carranza 
Doctrine, "  one  of  the  interesting  developments  of 
his  picturesque  reign.  This  has  been  stated  as 
follows : 

"No  individual  should  aspire  to  a  better  situation  than 
that  of  the  citizens  of  the  country  to  which  he  goes; 
legislation  should  be  general  and  abstain  from  distinc- 
tions on  account  of  nationality.  Neither  the  power  of 
nations  nor  their  diplomacy  should  serve  for  the  protec- 
tion of  particular  interests  or  to  exert  pressure  upon 
the  governments  of  weak  peoples  with  the  end  of  obtain- 
ing modifications  of  laws  which  are  disagreeable  to  the 
subjects  of  a  powerful  country." 

The  world  outside  largely  persists  in  taking 
Mexican  professions  at  their  face  value,  and  in 
solemnly  accepting  the  beautiful  Mexican  laws 
and  the  beautiful  Mexican  arguments  as  literally 
true.  On  this  point  I  have  quoted  elsewhere  the 
words  of  a  great  Mexican  publicist,  who  has  writ- 
ten: "The  carpet  baggers  of  Mexico  have  tradi- 
tions rooted  as  far  back  as  colonial  times.  They 
combine  the  shrewd  and  subtle  wit  of  the  Indian 
with  the  grandiose  words  of  modern  civilization, 
with  which  they  have  gained  the  sympathy  of  un- 
informed outsiders."  Our  own  State  Department 
has  answered  the  "Carranza  Doctrine"  in  no  un- 
certain terms  and  once  wrote  that  "the  Depart- 


EOMANCE  OF  MEXICAN  OIL        233 

ment  is  of  the  opinion  that  ...  an  attempt  is  be- 
ing made  to  coerce  American  companies  ...  to 
admit  in  advance  ...  the  correctness  of  the 
contention  of  the  Mexican  government  in  the 
matter  of  ownership  of  oil  deposits,  against  which 
the  American  government  has  made  solemn  pro- 
test as  threatening  confiscation  of  rights  legally 
acquired  by  American  citizens." 

In  fact,  there  is  no  reason  to  doubt  that  vir- 
tually all  of  the  oil  decrees  of  Carranza,  all  the 
rulings  of  his  ministers,  all  the  regulations  which 
have  been  enforced  with  such  insistence  on  petty 
details  have  been,  first,  appeals  to  sentimentalism 
abroad  and,  second,  childish  expedients  to  force 
recognition  by  the  foreigners  of  some  sort — any 
sort — of  superiority  in  the  Mexicans.  In  the  last, 
so  well  set  forth  in  the  State  Department  message 
quoted  just  above,  lies  the  basic  cause  of  the  fail- 
ure of  the  companies  to  reach  an  agreement  with 
the  Mexican  government.  Every  willingness  to 
discuss  a  point,  every  slackening  of  their  demands, 
has  been  accepted,  not  as  an  approach  to  a  solu- 
tion, but  as  a  weak  concession  to  Mexican  "na- 
tional pride"  and  personal  dignity. 

There  are  two  remaining  reasons  why  the  oil 
question  remains  unsettled.  They  are  extremely 
practical, — loot  and  incompetence.  Of  the  former, 
George  Agnew  Chamberlain,  the  novelist,  recently 
American  Consul  General  in  Mexico  City,  has 


234  TRADING  WITH  MEXICO 

written  in  his  book,  "Is  Mexico  Worth  Saving?" 
that: 

"Today  it  is  taken  as  a  matter  of  course  that  ninety 
per  cent  of  all  Mexican  officials  in  positions  of  trust  are 
openly  corrupt  and  will  inevitably  continue  so  until 
controlled  by  some  greater  power  than  any  single  faction 
of  their  peers.  .  .  .  The  graft  of  Mexico  is  outright  loot ; 
its  effect  is  to  open  simultaneously  all  the  arteries  of  the 
body  politic  and  to  pour  the  entire  life  blood  of  the 
nation  into  the  gullets  of  the  group  in  power." 

The  oil  companies  are  the  ripest  prey  for  loot  in 
all  Mexico.  Their  individual  employees  pay  graft 
of  certain  kinds — of  that  I  have  no  doubt,  although 
there  is  vigorous  and  official  denial.  The  com- 
panies themselves,  however,  pay  a  tribute,  through 
the  channels  of  astonishing  taxation  and  contribu- 
tions to  public  works,  which  is  no  less  than  the  buy- 
ing of  the  privilege  of  doing  business.  Another 
phase  appears  in  the  gossip  which  is  general  that 
one  of  the  English  companies  materially  aided  the 
Obregon  revolution — certainly  every  moneyed  in- 
terest in  Mexico  had  ample  opportunity  to  do  so. 
The  American  companies  were,  after  Obregon 's 
occupation  of  Mexico  City,  " shaken  down"  for 
about  $1,000,000  which  was  credited  against  taxes 
— and  the  taxes  afterwards  proportionately  in- 
creased ! 

As  a  whole,  the  companies  have  resisted  the 
temptation  to  ease  their  way  along  the  broader 


ROMANCE  OF  MEXICAN  OIL        235 

paths  of  high  government  by  the  voluntary  use  of 
money — they  have  generally  confined  their  ex- 
penses to  the  ample  totals  of  taxes  and  assess- 
ments. It  is  for  this  reason  that  one  of  the  most 
serious  phases  of  the  Mexican  congressional  dis- 
cussion of  petroleum  legislation  is  that  practically 
every  member  of  the  Mexican  congress  expects 
"his,"  and  when  it  is  not  forthcoming,  will  see  to 
it  that  nothing  favorable  to  the  foreign  companies 
finds  its  way  to  the  statute  books. 

Lastly,  incompetence.  Perhaps  the  most  appal- 
ling factor  of  the  whole  Mexican  situation  is  the 
utter  and  profound  ignorance  of  the  men  in  con- 
trol of  the  national  affairs,  men  to  whom  the  cul- 
ture, the  very  procedure,  of  modern  civilization 
are  as  a  closed  book.  I  believe  that  the  oil  problem 
is  made  serious  chiefly  because  the  Mexicans  who 
might  otherwise  be  willing  to  solve  it  are  so  un- 
educated, so  limited  in  viewpoint  and  understand- 
ing, that  they  cannot  conceive  of  the  vast  sums  of 
money  which  must  be  invested  in  pipe  lines,  stor- 
age tanks,  pumping  stations,  wharves  and  ships 
and  refineries  before  the  oil  taken  from  their  coun- 
try's soil  becomes  the  fabulous  treasure  of  which 
they  hear  so  much.  They  seem  utterly  incapable 
of  grasping  the  fundamentals  of  their  national 
problems;  the  pity  of  the  condition  almost  ob- 
scures the  significance  of  the  fact.  It  has  not  been 
easy  for  me  to  explain  the  oil  problem  in  its  sim- 


236  TRADING  WITH  MEXICO 

plest  phases  to  Americans,  yet  in  this  chapter  you 
who  have  read  it  have  learned  more  than  the  floor 
leaders  of  the  Mexican  congress  will  ever  know. 

It  is  through  this  forest  of  ignorance,  this  slime 
of  graft,  that  the  foreign  oil  companies  are  making 
their  way.  They  have  committed  many  mistakes 
in  their  handling  of  the  situation,  selfish  mistakes, 
mistakes  of  ignorance,  but  the  struggle  has  been 
against  forces  whose  depravity  has  been  literally 
unbelievable.  Personally,  I  am  no  fire-eater,  but 
I  have  seen  much  of  Mexico  and  I  have  seen  some- 
thing of  the  pyschology  of  depravity,  and  I  be- 
lieve that  the  last  lingering  hope  of  Mexican 
adaptability  to  world  conditions  lies  in  Mexican 
recognition  of  the  need  of  grasping  truth  rather 
than  theory,  of  facing  facts  with  manly  faith  in 
Mexico  and  in  Mexican  ability  to  solve  her  prob- 
lems as  other  nations  solve  theirs,  by  honesty  and 
patriotism  and  not  by  graft  and  personalism. 
This  attitude  the  oil  companies  have  nurtured, 
and  in  this  their  policy  has  been  a  policy  of  weak- 
ness. Seeking  here  an  outlet  for  the  day,  there  a 
hope  for  the  morrow,  they  have  put  a  premium 
on  Mexican  dishonesty,  given  a  prize  for  Mexican 
argumentative  skill.  I  know  some  of  the  prob- 
lems the  companies  have  faced,  I  know  the  need 
for  oil  during  the  war,  I  have  written  here  some- 
thing of  the  magnificence  of  their  achievement, 
but  for  all  that,  I  hold  that  they  have  had  much  to 


ROMANCE  OF  MEXICAN  OIL        237 

do  with  the  vacillation,  the  inefficiency,  the  watery, 
grafting  policy  of  the  Mexican  governments  from 
Carranza  to  Obregon.  They  have  had  a  large  part 
in  making  such  a  policy  successful  by  not  refusing 
unjust  demands  firmly  and  directly,  by  not  chal- 
lenging Carranza  to  close  the  oil  fields,  by  not 
taking  a  mighty  loss  to  save  the  endless  leak  of 
graft  and  taxes  and  cynical  legislation  which  is 
their  heritage  to-day.  Even  yet  their  policy  is 
one  of  conciliation  to  Obregon,  the  newest  presi- 
dent ;  still  they  are  offering  compromise,  still  giv- 
ing the  subtle  Mexican  mind  to  understand  that 
perhaps  they  might  agree  to  Article  27,  perhaps 
they  might  accept  a  little  higher  taxation,  perhaps 
they  would  like  a  few  concessions,  perhaps  they 
might  be  counted  on  to  get  the  hopefully  predicted 
Mexican  loan. 

All  this  is  the  last  phase  of  the  complicated 
problem.  We  have  said,  in  days  gone  by,  that  this 
is  the  problem  of  the  oil  companies,  that  theirs  is 
the  gain  and  theirs  should  be  the  cost.  But  if  I 
have  succeeded  here  I  have  conveyed  an  idea  of 
the  breadth  of  the  oil  problem.  It  is  no  longer  a 
question  of  whether  the  American  State  Depart- 
ment is  making  the  proper  moves  to  support  hon- 
est and  industrious  American  investors  and  work- 
ers abroad.  It  is  no  longer  the  academic  problem 
of  whether  the  oil  companies  are  handling  their 
business  in  an  intelligent  and  efficient  manner. 


238  TRADING  WITH  MEXICO 

The  problem  is  ours,  yours  and  mine,  of  you  in 
Kansas,  of  me  in  New  York,  of  our  cousins  in 
England  and  China.  It  is  the  problem  of  the  chap 
who  runs  a  Ford  and  of  the  man  who  is  cutting 
our  freight  bills  by  renting  us  a  truck,  of  the 
steamship  company  which  is  carrying  our  goods, 
of  the  captain  of  the  battleship  which  keeps  us 
safe  from  near  and  distant  enemies. 

The  problem  is  not  merely  whether  the  white 
peoples  of  the  world  are  to  have  the  right  to  de- 
velop the  riches  of  the  backward  nations  for  the 
benefit  of  the  world,  but  of  how  they  are  to  do  it. 
So  far,  even  in  forward-looking  lands,  it  has  been 
impossible  to  eliminate  private  ownership  and 
colossal  private  fortunes  from  the  wheel  of  oil 
production ;  in  Mexico,  to-day,  it  would  be  disaster 
beyond  understanding  to  turn  the  right  of  con- 
cession and  oil  privileges  over  to  corrupt  and 
inept  government.  The  battle  of  the  oil  companies 
in  Mexico  is  to  save,  first  themselves  from  such  a 
fate,  and  second  to  save  all  the  unopened  oil 
resources  in  the  world  from  the  strangling  hold  of 
such  governments  and  such  peoples  everywhere. 
The  oil  industry  can  no  longer  carry  the  burden 
of  such  conditions,  for  the  prices  of  your  gasoline 
and  your  ship's  fuel  oil  are  reflections  not  of  a 
world  scarcity,  but  of  the  uncertainty,  the  colossal 
artificial  difficulties  of  oil  production  in  the  back- 
ward lands. 


EOMANCE  OF  MEXICAN  OIL        239 

Commerce  has  fashioned  the  world  into  one 
brotherhood,  and  the  Great  War,  for  all  its  ap- 
pearances, has  welded  us  all  into  a  mightier  ma- 
chine of  civilization  than  history  has  ever  known. 
Oil  is  the  fuel  of  that  machine,  and  oil  must  come 
to  its  engine,  though  all  the  power  of  politicians 
and  bandits  combine  to  keep  it  in  the  soil.  The 
backward  countries  are  swept  into  the  forefront 
of  commercial  importance  when  oil  begins  to  flow 
from  their  soil.  The  process  is  going  on  all  over 
the  world.  In  Mexico  it  is  at  its  zenith.  The  oil 
must  come,  and  from  Mexico  before  all  others,  for 
Mexico  lies  in  the  heart  of  the  world,  her  shores 
touched  by  more  waters  in  proportion  to  her 
area  than  any  other  continental  nation.  And  her 
stores  of  oil  are  the  greatest  man  has  yet  found 
or  dreamed  of. 

To-day  the  world's  need  of  oil  threatens  the  life 
of  Mexico.  It  is  eating  out  her  body  by  revolu- 
tions, by  bandit  governments,  by  colossal  graft 
which  feeds  on  the  ever  growing  river  of  gold  from 
the  oil  fields.  The  world's  need  for  Mexico's  oil 
threatens  her  with  intervention,  not  because  of 
capitalistic  machinations,  but  because  of  the  crass 
and  wicked  injustices  which  the  wealth  has 
tempted  her  to  wreak  upon  her  foreign  residents, 
because  wealth  has  undermined  her  government 
and  given  her  over  to  demagogues. 


CHAPTER  IX 

THE  GOLDEN   GEESE 

IN  all  these  devious  ways  Mexico  has  tried  to 
kill  the  goose  which  lays  her  golden  eggs.  Not  the 
least  onerous  of  her  efforts  in  this  direction  has 
been  the  seeking  she  has  always  done  to  make  the 
United  States  government  and  American  business 
men  take  the  responsibility  for  this  precious  goose 
of  commerce.  And  sad  to  tell — to  the  Mexican 
mind  at  least — we  have  not  always  awakened  quite 
promptly  enough  to  our  sudden  new  responsibili- 
ties, and  the  goose  has  more  than  once  dropped 
near  to  dying  in  our  arms. 

That  golden  goose  was  the  product  of  the  na- 
ture of  Mexico  and  of  the  regime  of  Porfirio  Diaz. 
Long  before  Mexico  became  independent,  long  be- 
fore the  social  problems  which  assail  her  now  had 
been  allowed  to  gain  impetus,  Nature  had  given 
up  vast  riches  from  the  Mexican  soil.  Spain  gar- 
nered them  in,  and  gave  Mexico  such  care  as  she 
knew  bow  to  give,  and  the  golden  era  of  the  three 
centuries  of  Colonial  life  rolled  out.  Then  came 
the  first  revolution,  and  the  destruction  of  such 
wealth  as  Spain  had  left,  until  Diaz  organized 
what  remained  and  with  it  began  his  thirty  years 
of  peace. 

240 


THE  GOLDEN  GEESE  241 

In  those  thirty  years.  Mexico  was  changed  from 
a  land  whose  wealth  poured  out  in  bonanzas  re- 
turning only  caprice  for  industry  and  wealth  for 
caprice,  into  one  where  industry,  solidly  invested 
capital,  and  wise  foresight  gained  the  golden 
fruit.  In  other  words,  the  goose  became  domesti- 
cated, and  produced  golden  eggs  when  she  was 
appropriately  fed  with  golden  capital  and  golden 
brains. 

It  was  literally  the  wealth  imported  and  created 
by  those  years  of  peace  and  domestication  which 
made  possible  the  outbreak  of  revolutionary  ac- 
tivity in  1910  and  drove  Diaz  from  Mexico  in  1911. 
Prosperity  was  too  much  for  poor  Mexico. 

The  revolution,  indeed,  came  at  a  moment  of 
Mexico's  saturation  with  prosperity.  And  it  has 
continued  by  the  continuation  of  that  prosperity, 
which  has  furnished  and  still  furnishes  the  fuel  of 
banditry  and  revolution.  It  was  not  until  after 
Diaz  fell  that  the  great  wealth  of  Mexican  oil  be- 
came patent.  And  not  until  Carranza  began  im- 
posing his  taxes  on  the  oil  industry  do  we  find  the 
upsurgence  of  the  ideas  of  socialism,  bolshevism 
and  nationalization  which  have  been  the  battle- 
cries  of  all  the  governments  which  have  followed 
him.  Oil,  as  we  have  seen,  has  furnished  the 
sinews  of  war,  and  continues  to  furnish  them, 
despite  all  that  can  be  done  to  turn  the  tide. 

In  the  days  of  the  revolutions  previous  to 


242  TRADING  WITH  MEXICO 

the  rewards  of  success  were  governorships,  some- 
times presidencies,  and  always  some  brief  spell  of 
peace.  But  to-day  the  reward  is  too  vast,  the 
graft  quite  too  colossal,  to  slow  down  the  round  of 
struggle.  Wealth  pours  into  the  national  capital 
in  amounts  which  would  be  quite  hopeless  of  com- 
prehension to  the  revolutionists  of  the  older  day. 
More  tax  money  reaches  Mexico  City  to-day  from 
oil  alone  than  Diaz  had  from  every  source  at  his 
command — while,  save  for  the  oil  fields,  Mexico 
is  to-day  a  desert  waste. 

It  is  no  wonder,  then,  that  the  nation  can  and 
does  buy  herself  honors  and  praise  in  the  world 
outside,  that  she  considers  it  criminal  that  she  can- 
not buy  recognition,  cannot  force  aid  and  trade 
and  gold  to  flow  to  her.  Is  she  not  wealthy  and 
can  she  not  buy  pages  of  advertising  and  the  serv- 
ices of  hundreds  of  propagandists  of  every  type 
known  to  the  trade?  Gold  is  here  and  more  gold 
she  expects  to  bring  to  her  through  other  channels 
than  her  own  genuine  advancement.  She  is  back 
again  in  the  days  of  the  bonanza  mines,  when 
wealth  went  to  caprice  and  labor  and  industry 
meant  nothing. 

And  so  she  is  killing  the  golden  goose,  just  as 
she  killed  it  long  ago  under  the  Spaniards,  by 
forcing  it  to  lay  and  lay  and  lay,  till  at  the  height 
of  its  productivity  it  is  trembling  to  its  death.  De- 
structive legislation,  the  bitter  threat  of  its  con- 


THE  GOLDEN  GEESE  243 

fiscation,  the  continuing  theft  of  vast  sums  in  ex- 
change for  the  privilege  of  struggling  against 
these  laws  and  threats — these  are  striking  down 
the  golden  bird.  To-day  that  goose  is  dying,  and 
all  Mexico  seeks  is  to  bring  in,  somehow,  another 
goose  to  feed  her  hungry  office-holders.  She  is 
willing  that  it  shall  be  a  relatively  tame  domestic 
goose,  if  only  it  will  lay  the  golden  eggs  of  foreign 
investment,  trade,  commerce — she  would  gladly  go 
back  to  the  relatively  mild,  but  sure,  wealth  of  the 
time  of  Diaz. 

And  what  does  she  offer  to  induce  that  timid, 
wabbling  goose  across  the  national  fence?  I  can 
see  behind  her  promises  of  privilege  nothing  more 
substantial  than  outraged  rights,  and  beside  them, 
the  panting,  half-dead  corpses  of  two  golden 
geese  of  bonanza  days — the  almost  dead  mining 
industry,  the  sadly  ill  oil  industry.  For  Mexico 
has  limited  mining  by  confiscatory  taxation  and 
by  revolutionary  outrages  which  left  the  mines  in 
such  a  state  that  to-day  the  cost  of  operation  is 
too  great  for  them  to  continue  under  present 
prices.  And  she  has  set  about  the  starvation  of  the 
oil  industry,  as  we  have  seen,  by  limiting  it  to  the 
narrow  field  of  the  Tampico-Tuxpam  district, 
when  the  opportunities  for  oil  development 
throughout  the  whole  of  Mexico  are  probably  un- 
equaled  in  any  similar  area  in  the  world ! 

It  is  with  such  pictures  as  these  that  she  would 


244  TRADING  WITH  MEXICO 

tempt  trade  and  commerce  and  investment  to 
Mexico.  No,  the  "centennial  expositions, "  the 
trade  excursions,  the  special  trips  for  special 
friends  of  the  government,  even  the  official  tele- 
grams of  thanks  to  American  officials  who  breathe 
a  misplaced  idealism  with  regard  to  Mexico — 
none  of  these,  nor  all  of  them,  can  quite  make  a 
screen  before  the  unhappy  corpses  of  the  once 
lively  golden  geese  of  Mexican  prosperity. 

Let  us  resume,  briefly,  the  list  of  the  events 
which  have  marked  the  process  of  the  years  in  the 
Mexican  revolutions  which  began  with  the  upris- 
ing of  Madero — and  which  have  been  the  means  of 
killing  foreign  enterprise  and  native  faith  in  Mex- 
ico 's  succeeding  governments.  The  list  is  long, 
but  it  cannot  be  forgotten. 

The  revolution  in  1917-1918  virtually  wiped  out 
religion  in  Mexico,  profaned,  sacked  and  burned 
churches,  killed  and  outraged  priests,  violated 
nuns  and  girls  in  the  convents,  and  drove  into 
exile  thousands  of  priests.  The  Constitution  of 
1917  virtually  abolished  religion,  and  yet  the  Prot- 
estant churches  have  been  allowed  to  continue 
their  work  (with  the  result  that  many  Protestant 
missionaries  of  Mexico  were  active  Carranza  and 
Obregon  propagandists  in  this  country).  While 
most  of  the  exiled  Catholic  clergy  have  now  been 
allowed  to  return,  they  still  work  under  conditions 
which  make  religion  a  virtual  monopoly  of  the 


THE  GOLDEN  GEESE  245 

state,  and  practically  eliminate  religious  freedom 
in  Mexico. 

Ten  years  of  revolution  have  all  but  wiped  out 
education  in  Mexico :  first,  by  destroying  the  Cath- 
olic schools,  which  were  almost  the  only  educa- 
tional system  in  the  country  outside  the  great 
cities,  and,  second,  by  so  curtailing  the  appropria- 
tions for  public  school  expenses  as  to  make  edu- 
cational organization  impossible. 

The  revolutionary  hordes,  when  Mexico  City 
was  taken  in  1915  by  General  (now  President) 
Obregon,  sacked  the  city  almost  as  thoroughly  as 
Attila  sacked  Kome,  the  public  being  invited  by 
proclamation  to  join  in  the  looting.  Beautiful 
houses  were  made  barracks  for  the  soldiers ;  auto- 
mobiles and  horses,  including  those  of  foreign 
diplomats,  were  taken;  stores  and  homes  were 
broken  open  and  robbed,  and  trainloads  of  rich 
furniture,  including  carloads  of  pianos,  were 
shipped  out,  much  of  the  loot  coming  to  the  United 
States  to  be  sold.  While  the  population,  rich  and 
poor,  starved,  no  food  was  allowed  to  enter  the 
city,  and  trainloads  of  beans  and  corn,  the  staples 
of  Mexican  food,  were  shipped  out. 

The  revolution  virtually  suspended  the  political 
rights  of  the  Mexican  people.  Under  Carranza's 
decrees,  which  to  this  day  form  the  chief  basis  of 
government  in  Mexico,  no  one  may  hold  office  who 
ever  served  under  Diaz  or  Huerta,  or  who  was  not 


246  TRADING  WITH  MEXICO 

known  to  be  a  Carranzista  before  the  Huerta  up- 
rising— save  by  special  permission,  granted  only 
on  personal  appeal  to  the  president  himself.  The 
revolutionists  continuously  refused  to  allow  any 
Mexicans  but  those  of  known  sympathies  with 
themselves  to  participate  in  elections,  so  that  only 
a  fraction  of  the  eligible  voters  have  ever  taken 
part  in  any  election. 

The  revolution  exiled  from  Mexico,  on  one  pre- 
text or  another,  virtually  all  the  higher  type  of 
Mexicans,  the  men  who  throughout  all  Mexican 
history  have  been  the  stable  and  stabilizing  ele- 
ment in  the  government,  leaving  Mexico  in  the 
hands  of  demagogues  of  the  worst  type,  from  the 
highest  offices  to  the  lowest.  There  has  been  talk 
of  political  amnesty,  but  none  has  yet  been  forth- 
coming, and  the  few  Mexican  exiles  who  return 
do  so  under  personal  assurance  of  their  personal 
safety. 

Mexico  is  to-day  taxing  her  people,  both  natives 
and  foreign  corporations,  to  an  extent  and  with  a 
recklessness  unknown  even  in  war-ridden  Europe. 
Taxes  on  imports  and  exports  have  been  doubled 
and  sextupled.  The  stamp  tax  has  been  quadru- 
pled and  broadened  to  cover  almost  every  possible 
human  activity;  direct  taxation  on  every  form  of 
industry  and  export  taxes  on  the  country's  prod- 
ucts have  become  the  normal,  where,  before,  these 


THE  GOLDEN  GEESE  247 

forms  of  taxation  were  distinctly  avoided  in  order 
to  encourage  enterprise.  Mexico  is  still  spending 
more  on  her  army,  mostly  in  graft,  than  Diaz 
spent  on  his  whole  government,  including  interest 
on  foreign  indebtedness  (which  the  revolution  has 
never  paid). 

The  present  taxation  system  has  been  coupled 
with  favoritism  and  graft  to  an  extent  that  pun- 
ishes with  ruin  any  enterprise  (save  those  fed 
from  the  natural  resources  of  the  soil,  such  as  oil) 
which  is  engaged  in  a  business  where  profiteering 
is  not  possible. 

Carranza,  as  we  have  seen,  financed  his  revolu- 
tion by  issuing  2,000,000,000  pesos  of  paper  money, 
forced  into  circulation  at  the  points  of  bayonets. 
None  of  this  has  ever  been  honestly  redeemed. 
The  paper  money  orgy  covered  three  years,  and 
absolutely  wiped  out  all  semblance  of  credit  and 
all  use  of  paper  in  business.  In  its  course,  the 
revolution  took  from  the  banks  in  "loans"  approx- 
imately $28,000,000,  completing  the  ruin  of  the 
banking  system,  as  I  have  described  above. 

Carranza  took  over  the  railways  of  the  republic 
in  1914,  and  since  that  date  the  revolutionary 
group  has  operated  them  for  the  profit  of  the  gov- 
ernment and  themselves.  They  have  increased 
passenger,  freight  and  express  rates  to  figures 
many  times  the  normal,  forcing  the  properties  to 


248  TRADING  WITH  MEXICO 

yield  the  national  treasury  $1,500,000  a  month, 
meanwhile  paying  nothing  of  rental  to  their 
owners,  whose  fixed  charges  are  being  defaulted  at 
the  rate  of  $1,000,000  a  month— a  total  theft  of 
nearly  $400,000,000,  growing  at  the  rate  of  $1,- 
000,000  a  month. 

The  revolutionaries  gained  the  support  of  the 
sincere  Mexican  progressives  and  of  American 
students  on  the  ground  of  a  defense  of  the  Mex- 
ican Constitution  of  1857,  but  after  they  came  to 
power  they  promulgated  the  Constitution  of  1917, 
a  new  instrument,  although  the  old  Constitution 
was  amply  provided  with  means  for  its  amend- 
ment. The  new  document  is  the  most  radical  writ- 
ten Constitution  in  effect  in  the  world  to-day,  but 
its  provisions  have  been  used  so  far  only  for  the 
aggrandizement  and  enrichment  of  those  who  can 
abuse  its  privileges.  The  provisions  for  the  con- 
fiscation and  distribution  of  all  pieces  of  land  of 
large  area  have  been  used  only  to  take  properties 
of  foreigners  and  Mexicans  of  the  old  regime  to 
hand  them  over  to  revolutionary  leaders.  The 
provisions  against  the  operating  of  mines,  etc., 
by  foreign  companies  have  so  far  been  used  only 
to  transfer  such  properties  to  friendly  Mexicans 
and  Germans.  The  provisions  " nationalizing" 
oil  deposits  have  been  used  only  to  exact  tower- 
ing taxes  and  millions  of  dollars  of  loot  from 
the  foreign  companies  and  to  drive  the  properties 


THE  GOLDEN  GEESE  249 

more  and  more  into  the  hands  of  the  British,  Dutch 
and  Germans,  and  away  from  the  Americans. 

The  revolution  has  allowed  and  abetted  the 
looting  and  ravaging  of  Mexico  by  every  method 
known  to  brigandage.  Hundreds  of  thousands  of 
cattle  have  been  killed  for  their  hides;  thousands 
of  acres  of  standing  crops  have  been  wantonly 
ruined ;  seed  grains  have  been  stolen  or  destroyed ; 
the  vast  sugar  industry,  left  stagnant  by  Zapata's 
depredations  has,  since  the  government  regained 
possession,  been  wiped  out  by  the  shipping  away 
for  "junk"  of  the  machinery  of  the  sugar  mills; 
graft  has  been  levied  against  relief  trains  sent  by 
the  American  Red  Cross  to  feed  starving  Mexi- 
cans and  the  contents  of  such  trains  even  stolen 
and  sold  for  personal  profit  of  generals. 

Carranza  encouraged  and  abetted  a  military 
oligarchy  which  supported  brigandage  as  a  means 
for  its  own  profit.  Campaigns  against  the  bandits 
and  rebels  were  not  pressed,  arms  and  ammuni- 
tion were  sold  by  the  federals  to  the  bandits  and 
rebels,  in  order  that  the  military  might  continue 
to  have  work  to  do.  The  officers,  acting  as  their 
own  paymasters,  padded  the  army  rolls  to  many 
times  their  actual  size,  and  the  balance  between 
the  expenses  and  pay  of  the  actual  army  and  the 
phantom  army  was  pocketed  by  the  officers.  The 
Obregon  process,  a  variation  of  the  Carranza 
plan,  paid  millions  of  pesos  in  cash  and  land  to 


250  TRADING  WITH  MEXICO 

ex-bandits  and  revolutionaries,  setting  up  Villa 
on  a  rich  hacienda,  and  paying  out  the  resources  of 
the  nation  to  buy  the  appearance  of  a  peace. 

Revolutionary  favorites,  as  we  have  seen,  were 
given  the  rich  state  of  Yucatan  for  loot.  They 
foisted  upon  that  community  (the  only  spot  in 
Mexico  where  any  wealth  has  ever  been  created 
through  manufacturing  and  industry  as  opposed 
to  the  sacking  of  the  riches  of  the  soil),  a  so-called 
" socialistic "  regime.  A  "modern  state "  was  set 
up,  and  the  experiment  of  taking  from  the  rich  for 
the  benefit  of  the  poor  was  set  in  full  swing.  By 
means  of  a  great  national  monopoly  of  the  hemp 
industry,  prices  were  so  inflated  that  in  the  course 
of  five  years  the  American  farmer  paid,  in  artifi- 
cially-increased prices  for  twine  for  his  wheat- 
binding  machinery,  $112,000,000  to  the  Mexican 
revolution.  The  state-controlled  hemp  trust  has 
been  forced  to  relinquish  its  control,  and  the 
costly  experiment  seems  passed.  Here  is  the  first 
collapse  of  the  Mexican  fetish  of  socialistic  dema- 
gogy, but  it  seems  safe  to  believe  that  it  will  not 
be  the  last. 

So  stands  the  record,  incomplete,  shorn  of  de- 
tail, but  each  item  taken  from  the  history  of  shame 
which  has  been  written  in  Mexico  in  the  years  just 
passed.  Hidden  behind  a  curtain  of  fair  words 
and  lofty  idealism,  the  shame  has  been  committed, 
but  behind  that  same  curtain  to-day  disintegration 


THE  GOLDEN  GEESE  251 

is  hurrying  on,  coming  as  it  came  to  Yucatan  in 
the  grist  of  inevitable  retribution.  That  we  may 
understand  the  end,  it  behooves  us  not  to  close  our 
eyes  to  the  beginnings. 

The  killing  of  the  golden  geese  of  recent  years 
in  Mexico  carries  a  responsibility  from  which  the 
United  States  cannot  be  entirely  free.  The  eight 
years  of  the  Wilson  regime,  when  American  for- 
eign policy,  as  enunciated  by  Secretary  of  State 
Bryan,  held  that  Americans  who  ventured  abroad 
did  so  at  their  own  risk  and  had  no  right  to  ask 
the  protection  of  their  government,  was  a  mighty 
factor  in  the  despoliation  which  followed  in  Mex- 
ico. Carranza,  seeking  the  excuse  for  the  policies 
to  which  the  great  wealth  of  the  oil  fields  tempted 
him,  found  in  this,  our  official  attitude,  his  oppor- 
tunity for  baiting  the  Americans  and  with  them 
most  other  foreigners  in  Mexico.  His  virtual  es- 
pousal of  the  German  cause  in  the  Great  War  gave 
him  still  further  opportunities,  and  the  result  has 
been  written  in  the  outrages  which  he  committed 
against  the  Americans.  This  is  a  list  only  less 
appalling  than  the  list  of  the  outrages  which  were 
perpetrated  against  Mexico  and  the  Mexicans  in 
the  name  of  the  revolution.  Here,  briefly,  is  the 
record.  Although  many  of  its  outrages  were  com- 
mitted only  during  the  Carranza  regime,  it  must 
be  remembered  that  that  regime  is  the  direct  an- 
cestor of  those  which  have  followed  it,  for  the  per- 


252  TRADING  WITH  MEXICO 

sonalities  seem  the  same,  the  shift  in  their  places 
being  the  only  change. 

The  revolution  has  killed  over  3,000  foreigners, 
most  of  them  in  cold  blood,  probably  not  one  per 
cent  in  fair  and  open  battle. 

The  revolution  has  murdered  over  600  Ameri- 
cans since  1910,  and  the  revolutionaries  have  vio- 
lated scores  of  American  women. 

The  revolution  has  ruined  over  $1,000,000,000 
worth  of  American  property  in  Mexico  through 
wanton  destruction,  cynical  recklessness  and  sav- 
age bravado. 

The  revolution  has  driven  from  their  homes  in 
Mexico  more  than  30,000  Americans,  men,  women 
and  children,  who,  in  carrying  to  Mexico  the  high 
standards  of  American  living,  American  business 
and  American  ethics,  were  pioneers  of  our  trade 
and  influence,  and  potential  civilizers  of  Mexico. 

The  revolution  has,  as  we  know  full  well,  pro- 
mulgated that  Constitution  of  1917  which  has  been 
the  bane  of  American,  even  more  than  it  has  of 
Mexican,  business. 

The  Mexican  revolution,  by  its  baiting  of  the 
American  government  through  nearly  a  decade, 
has  nurtured  in  Mexico  and  sought  to  spread 
throughout  Latin- America  a  hatred  and  fear  of 
Americans  and  hostility  to  the  Monroe  Doctrine. 
This  is  threatening  not  only  our  own  prestige  on 
this  continent,  but  the  peace  of  the  established 


THE  GOLDEN  GEESE  253 

governments  of  our  Latin-American  sisters, 
through  the  fomenting  of  hostility  and  unrest 
within  their  frontiers. 

More  than  all,  the  revolution  has  made  of  Mex- 
ico a  refuge  for  the  enemies  of  the  United  States, 
first  by  allowing  to  be  set  up  in  its  capital  the  cen- 
tral organization  of  the  German  spy  and  sabotage 
system  in  the  Western  world,  and  since  the  war 
by  welcoming  and  aiding  the  bolshevists  and  radi- 
cals who  are  working  openly  for  the  overthrow  of 
American  institutions  in  this  country  and  the  de- 
struction of  American  industry  and  trade  in 
Mexico. 

This  is  a  bitter  record,  but  without  it,  as  I  have 
had  to  say  of  many  things  in  this  book,  the  picture 
cannot  come  clear  to  our  eyes.  "We  cannot,  in 
justice  to  our  own  understanding,  forget  that  since 
the  death  of  Madero,  and  even  before,  the  Mexican 
revolution  has  been  but  one  movement.  The  rulers 
who  have  succeeded  each  other  have  all  been  of 
the  same  group,  and  those  in  power  in  1921  are 
those  who  were  scrambling  for  place  within  the 
same  ruling  group  in  1913.  "The  revolution/'  as 
one  of  them  has  said,  "is  the  revolution. "  And 
so  it  is  in  more  senses  than  one.  We  but  deceive 
ourselves  if  in  our  very  genuine  desire  to  give 
each  new  Mexican  president  a  chance,  we  close  our 
eyes  to  the  obvious  facts  of  his  political  heritage 
and  the  human  tools  he  must  use. 


254  TEADING  WITH  MEXICO 

Only  one  word  more,  and  the  tale  of  the  golden 
geese  is  done.  The  protection  which  the  Ameri- 
can government  has  failed  to  give  its  traders  and 
investors  who  have  gone  abroad  has  had  an  effect 
which  those  traders  and  investors  must  obviate 
before  they  step  forth,  at  least  into  Mexico,  again. 
Through  the  years  of  the  Great  War,  our  govern- 
ment, along  with  those  of  the  Allies,  put  into  effect 
in  neutral  countries,  a  " Black  List"  which  was 
designed  to  keep  German,  Austrian  and  Turkish 
firms  and  their  sympathizers  from  dealing  and 
trading  with  the  neutrals  or  with  the  peoples  of 
the  allied  countries. 

Mexico  was  of  course  our  chief  field  for  activity, 
and  there  our  Black  List  had  its  severest  test.  In 
those  months  of  struggle,  we  committed  many 
faults ;  we  shut  off  friendly  firms  from  trade  with 
this  country ;  we  encouraged,  by  many  stupidities, 
the  activities  of  smugglers  and  "cloaks"  who 
bought  for  the  Germans  in  Texas  jobbing  towns; 
we  created  for  ourselves  a  phalanx  of  enemies  of 
American  trade  who  will  not  soon  forget.  Worse 
than  this,  even,  when  the  war  was  over  the  tre- 
mendous machinery  of  the  enforcement  of  the  pro- 
visions of  the  Enemy  Trading  Act,  with  its  lit- 
erally priceless  information  regarding  the  busi- 
ness of  Mexico,  the  capital  and  trade  of  the  Ger- 
mans, the  Mexicans,  and  the  Americans  in  the 
whole  country — all  this  was  thrown  away.  Lit- 


THE  GOLDEN  GEESE  255 

erally  it  was  cast  into  the  waste-basket,  and  the 
information  which  if  followed  tip  and  kept  even 
partially  up  to  date  would  to-day  be  the  richest 
mine  of  information  for  American  importers  and 
exporters  was  scrapped  like  worn-out  machinery. 
I  do  not  know  how  many  millions  of  dollars  were 
spent  in  gathering  this  data  for  the  War  Trade 
Board,  but  I  do  know  the  nature  of  that  data.  It 
is  gone,  and  the  advantage  which  might  have  come 
from  it  is  lost  forever. 

But  the  unfriendliness  which  was  engendered 
by  our  mistakes,  which  was  only  slowly  being 
wiped  out  by  the  correction  of  those  mistakes 
when  peace  came — that  unfriendliness  remains. 
That  is  our  only  heritage  of  our  Mexican  activity 
in  the  war;  it  couples  up  with  our  own  mistakes 
of  ignorance  or  of  carelessness  during  the  same 
period. 

From  1915  to  1919,  literally  all  the  foreign  trade 
of  Mexico  passed  through  the  United  States.  Im- 
ports and  exports,  the  goods  from  and  for  Eng- 
land and  Japan  and  China  and  Africa  no  less  than 
our  own  domestic  trade  with  Mexico  went  through 
the  border  ports  by  rail.  Of  necessity,  the  advan- 
tages of  ship  traffic  were  lost,  and  our  manufac- 
turers and  our  buyers  of  Mexico's  raw  materials 
had  the  greatest  opportunity  of  all  time  to  capture 
the  vast  bulk  of  the  Mexican  trade.  The  tremen- 
dous apparent  increases  in  our  Mexican  trade  dur- 


256  TRADING  WITH  MEXICO 

ing  the  war  years  were  only  the  record  of  the 
world's  commerce  passing  through  our  border 
towns.  But  to-day  we  have  retained  only  a  little 
of  the  gains  recorded  then,  and  we  shall  lose  still 
more  of  what  we  have  kept.  And  why?  Because 
we  have  never  truly  sought  Mexican  trade  and  do 
not  seek  it  to-day. 

Ah,  yes.  We  want  to  trade  with  Mexico,  but,  I 
repeat,  we  have  never  sought  Mexican  trade.  We 
have  wanted  to  sell  Mexico  our  surplus,  to  have 
her  take  our  extra  runs  and  use  the  goods  we  have 
made  in  quantities  for  other  countries.  But  we 
have  never  sought  to  meet  the  exigencies  of  the 
Mexican  market.  We  have  never  done  (as  a  na- 
tion, I  mean,  of  course)  what  England  and  Ger- 
many have  done;  we  do  not  follow  specifications 
literally  and  send  cloth,  for  instance,  with  exactly 
the  number  of  threads  per  inch  which  the  Mexican 
must  have  to  get  his  best  customs  classification. 
We  do  not  rearrange  our  patterns  to  meet  a  spe- 
cial demand  of  the  Mexican  market,  carefully  de- 
scribed to  us  by  our  customers.  It  is  the  old  story 
of  American  trade  everywhere  in  the  world — our 
manufacturers  have  heard  it  in  a  dozen  ways,  and 
they  are  justly  tired  of  the  sound  of  it.  My  only 
point  is  that  during  the  period  of  the  war,  when 
Mexican  trade  had  of  necessity  to  come  to  us  in 
great  volume,  we  did  not  link  the  Mexican  buyer 


THE  GOLDEN  GEESE  257 

to  us,  either  by  meeting  his  demands  or  by  helping 
him  to  understand  our  difficulties. 

So  it  was  that  when  the  golden  goose  of  Mexi- 
can business  was  surreptitiously  put  into  our  arms 
when  we  were  busy  with  a  lively  war  in  Europe, 
we  did  not  take  the  care  of  it  that  its  parents 
might  have  expected  of  us. 

The  result  is  that  to-day  we  have  little  hold  on 
the  trade  of  Mexico,  despite  the  astonishing  fig- 
ures of  our  preponderance  in  it.  For  what  we 
ship  to  Mexico  is  largely  food  and  what  we  take 
from  Mexico  is  largely  oil — an  exchange  which  is 
more  significant  than  columns  of  figures  in  show- 
ing the  economic  condition  of  the  land  we  trade 
with.  Again  we  swing  back  to  the  one  great,  sig- 
nificant fact,  the  need  of  an  activity  which  trans- 
cends mere  barter,  which  has  little  to  do  with 
whether  we  are  deceived  by  Mexican  conditions  or 
whether  we  are  willing  to  risk  them  now  for  the 
sake  of  the  great  possible  gains  of  the  future. 
This  is  the  issue  of  our  duty  to  learn  how  we  can 
serve  in  the  solution  of  the  problem — and  to  de- 
vote something  of  our  energy  to  that  solution. 


CHAPTER  X 

THE  HIGHWAY  TO  SOLUTION" 

THE  solution  of  the  problems  of  Mexico's  com- 
merce and  business  seems  to  rest  in  hands  alien 
to  Mexico.  The  destructions  of  the  past  ten  years 
are  bringing  her  steadily  nearer  to  annihilation, 
and  Mexico  herself  seems  helpless  to  save  herself. 
These  make  the  appearance,  and  it  is  vivid  indeed. 
But  it  may  still  be  only  an  appearance,  if  the 
forces  which  are  acting  and  must  act  can  be 
brought  to  see  that  they  can  and  must  work  in 
Mexico  herself. 

The  cycle  of  destructions  insists  upon  showing 
itself  as  the  round  from  the  materialism  of  Diaz 
on  to  the  destructions  of  an  era  of  profaned  uto- 
pian  idealism  and  now  to  an  era  of  materialism 
again.  But  this  time  it  is  an  era  of  materialism 
which  differs  from  the  Diaz  time,  and  is  more 
potent,  at  the  moment,  for  good  and  for  ill.  For 
to-day,  in  the  high  places  of  government,  control- 
ling through  their  greed  the  very  minions  of  gov- 
ernment, is  an  animating  power  which  is  not  the 
idealism  nor  the  self-sacrifice  of  devoted  rulers, 
but  the  worship  of  wealth  alone.  That  power  is 
mighty  for  destruction,  but  at  the  very  moment 
that  it  functions  thus,  another  form  of  wealth, 

258 


THE  HIGHWAY  TO  SOLUTION      259 

"capitalism"  if  you  will,  is  working  slowly  for  the 
saving  of  such  of  Mexico  as  is  being  saved.  For 
"capitalism,"  in  foreign  guise,  in  such  enterprises 
as  even  the  mad  radicals  of  the  day  point  to  as  the 
signs  of  their  "progress" — here  capitalism  is  giv- 
ing Mexico  her  only  surcease  from  the  destruc- 
tions of  her  rulers. 

Wealth  is  the  one  power  which  men  recognize 
in  Mexico.  It  is  to-day  above  government,  for  it 
dominates  government  and  destroys  government 
by  the  very  temptation  which  it  holds  out  to  suc- 
cessful revolution.  It  rules  to-day  in  Yucatan, 
even  as  it  ruins  the  individuals  of  Yucatan.  Yet, 
too,  it  rules  in  the  oil  fields,  for  it  makes  the  vast 
production  of  oil  possible,  because  it  alone  has  the 
power  and  the  foresight  to  develop  oil's  poten- 
tialities. And  there,  in  the  oil  fields,  it  is  being 
turned,  ever  so  slightly,  to  the  beginnings  of  its 
ultimate  destiny,  which  must  be,  I  believe,  the  sav- 
ing of  Mexico. 

Strange  tales  I  have  told  of  the  oil  fields,  and 
yet  it  is  a  far  stranger  tale  which  I  have  now  to 
tell.  For  I  would  point  out  the  vast  opportunity 
which  awaits  that  wealth  of  oil  for  the  saving  of 
Mexico.  In  the  light  of  that  possibility,  the 
mighty  stream  of  oil  which  in  a  thousand  ships 
pours  from  Mexico  into  the  industries  of  the 
globe,  is  a  helpless  Niagara,  childishly  uncon- 
scious of  its  own  power. 


260  TRADING  WITH  MEXICO 

The  constitutions  and  laws  and  decrees  of  the 
Mexican  revolutionaries  still  hold  the  wealth  of 
oil  in  their  grip.  There  has  been,  in  the  summer 
months  of  1921,  a  mild  effort  to  break  that  grip, 
to  stay  the  hand  of  strangulation  which  is  at  the 
throat  of  the  oil  industry,  but  this  is  still  self-de- 
fense. There  is  a  yet  more  persistent  force  than 
mere  taxation  or  even  than  mere  confiscation  at 
work  in  the  oil  fields  of  Mexico.  This  force  savors 
of  elements  mightier  than  mere  industry ;  it  seems 
to  be  taking  the  form  of  a  sinister  elaboration  of 
the  vital  principles  of  bolshevism — the  bolshevism 
which  rules  in  Russia  and  is  a  battle  cry  in  Mexico. 

Among  these  principles  of  bolshevism,  enun- 
ciated by  Lenin  himself  a  year  ago,  was  the  setting 
of  the  capitalistic  powers  at  each  other's  throats, 
such  powers  as  Japan  and  America,  that  they 
might  destroy  one  another. 

In  Mexico  we  see  that  threat  from  Russia  de- 
veloped with  the  thoroughness  of  a  too-eager  pu- 
pil. In  Yucatan  the  cycle  has  brought  two  vast 
financial  interests  to  battle — the  millions  of  the 
Equitable  and  the  Royal  Bank  of  Canada,  against 
the  International  Harvester  with  other  unlimited 
resources.  In  mightier  and  more  daring  terms, 
and  even  more  deliberately,  in  Tampico  and  in  the 
false  issues  of  concessions,  Mexico  and  the  gov- 
ernments, radical,  bolshevist  indeed,  of  the  revo- 
lutionary era,  have  been  setting  not  merely 


THE  HIGHWAY  TO  SOLUTION      261 

groups  of  financiers  but  the  interests  of  nations  at 
each  other's  throats.  The  issues  of  concessions 
on  the  one  side  and  open  oil  fields  on  the  other 
seem  to  have  been  planned  and  fomented  and  dis- 
tributed with  a  deliberation  which  is  not  Mexican 
to  bring  the  United  States  and  England  to  grips — 
in  Mexico.  So  the  spoken  threat  of  Lenin  finds 
elaborate  action  in  distant  Mexico. 

Oil  has  been  the  victim,  the  tool,  then,  of  those 
who  would  destroy  our  civilization?  We  do  not 
know.  But  this  we  do  know — that  to  save  itself, 
to  save  great  nations  from  war,  to  save  the  world's 
oil  for  the  uses  of  civilization,  oil  must  come  to  its 
own  rescue.  It  may  be  saved  temporarily  in  other 
ways  than  by  itself,  but  itself  it  must  save  sooner 
or  later.  If  sooner,  the  power  will  be  for  good; 
if  later,  it  will  be  for  destruction,  even  as  the 
powers  in  Yucatan  are  being  expended  for  de- 
struction. The  comparison  is  inadequate,  per- 
haps unfair,  but  the  vision  is  crystal  clear.  It 
shows  the  last  great  power  of  the  world — wealth — 
diverted  from  its  proper  channels  to  battle  within 
itself.  The  dragon's  teeth  of  capitalism  have 
raised  up  armies  and  the  stone  cast  by  bolshevism 
has  thrown  them  at  each  other's  throats. 

And  this  cannot  be,  and  must  not  be.  Our  civi- 
lization rocks.  Were  it  to  pass  on  to  the  mil- 
lennium, the  rocking  would  be  worth  the  price. 
But  we  see,  not  the  millennium,  but,  as  in  Yucatan, 


262  TRADING  WITH  MEXICO 

the  coming  of  new  destructions,  with  capital,  and 
labor,  in  roles  of  ignominy. 

For  to-day  oil,  and  the  capitalism  it  represents, 
as  yet  does  little  good  for  Mexico.  It  pours  its 
wealth— nearly  $50,000,000  a  year— into  the  cof- 
fers of  government  and  there,  like  the  golden  ap- 
ple, it  creates  discord  and  wars  and  bloodshed. 
It  feeds  and  fattens  the  group  in  power  and  makes 
it  worth  the  while  for  other  groups  as  fast  as  their 
petty  agitations  will  allow,  to  rise  up  and  over- 
throw their  predecessors,  to  the  end  of  getting 
their  share  of  the  loot,  and  a  new  distribution  of 
favors.  The  gold  which  pours  into  the  national 
treasury  inspires,  as  we  have  seen,  all  manner  of 
radical  legislation  and  constitutional  provisions 
and  oppressions  to  make  the  capitalism  which  de- 
velops the  oil  disgorge  more  and  more  of  oil's 
wealth,  and  bow  more  deeply  beneath  the  yoke  of 
political  personalism. 

Thus  is  the  gold  which  flows  from  the  oil  wells 
dynamically  active — as  a  poison  and  a  weapon 
against  those  who  create  it.  The  oil  companies  of 
themselves  take  no  part  in  Mexican  politics.  This, 
I  admit,  is  almost  unbelievable,  but  I  am  convinced 
that  except  where  government — our  government 
or  that  of  England — has  directed  them,  the  oil 
companies  have  not  used  their  power  politically. 
The  United  States  and  England  have  both  taken 


THE  HIGHWAY  TO  SOLUTION       263 

hands  in  Mexican  politics,  and  particularly  was 
Washington  active  in  arbitrating  the  destinies  of 
Mexico  in  the  eight  years  just  closed.  But  that 
does  not  concern  us  just  now.  The  liquid  gold 
from  the  oil  fields  has  never  used  its  power  alone. 

It  has  not  yet  used  its  power  for  its  great  possi- 
ble good,  either.  Not  even  for  so  much  good  as 
the  International  Harvester  and  the  Eric  corpora- 
tion have  used  theirs  in  Yucatan  to  the  discomfi- 
ture of  Alvarado  and  the  chastening  of  the  hene- 
quen  industry.  Never,  for  the  sake  of  a  principle 
alone,  has  an  oily  hand  been  lifted  to  say  "thus 
far  and  no  farther. ' '  Never  has  an  oil  official  done 
more  than  cry  aloud  over  the  pressure  of  the 
thumb-screws — cries  which  do  no  more  than  ex- 
tract more  wealth  to  fatten  the  generals  who,  with 
added  strength,  only  gave  the  screw  another  turn. 

For  seven  years  the  oil  companies  paid  the  rebel 
general,  Manuel  Pelaez,  a  comfortable  tribute.  In 
that  time  they  also  paid  Carranza  all  he  asked  in 
'  '  taxes. ' '  They  were  helpless,  and  the  war  was  the 
excuse,  not  for  strength  on  their  part,  but  for  sub- 
mission to  unwarranted  and  unjust  oppression, 
oppression  which  had  no  object  save  personal  ag- 
grandizement and  enrichment. 

Here  is  the  one  power  in  Mexico  which  is  potent, 
accepting  the  rule  of  corrupt  government,  passing 
on  its  power  of  gold  to  those  who  use  it  for  noth- 


264  TRADING  WITH  MEXICO 

ing  but  their  own  ends,  and  for  the  destruction 
of  all  that  our  civilization  holds  dear. 

They  buy  privilege  in  Mexico,  the  privilege  to 
do  the  business  which  they  must  do,  while  the  sin- 
ister powers  to  whom  they  pay  tribute  cut  them 
from  the  development  of  new  fields  upon  which 
their  ultimate  future  and  Mexico's  immediate  fu- 
ture depend.  The  whole  power  of  Mexican  revo- 
lution and  of  the  groups  which  control  the  revo- 
lution lies  in  that  one  principle  which  I  have  re- 
iterated :  they  give  no  rights,  they  sell  no  rights ; 
only  privilege  is  on  the  auction-block.  Those  who 
buy  it  to-day  and  those  who  contemplate  the  buy- 
ing of  it  as  a  way  to  enter  a  promising  foreign 
trade  and  investment  field  are  the  upholders  of 
the  shameful  exploitation  under  which  Mexico 
herself  bows.  And  of  these,  the  greater  sinner, 
to  my  mind,  is  he  who  plans  to  enter  Mexico  now. 
After  all,  we  must  in  fairness  admit  that  the  old 
companies  have  the  potent  excuse  of  their  vast 
holdings  and  of  their  duty  to  their  stockholders. 

The  plan  which  I  hold  as  the  solution  of  the  eco- 
nomic and  political  chaos  of  Mexico  would  com- 
prise a  shifting  of  the  center  of  control  from  poli- 
tics to  economics,  where  the  motive  force,  at  least, 
has  ever  rested.  I  would  no  longer  tolerate  the 
application  of  political  remedies  for  economic  ills, 
but  would  go  so  far  as  to  suggest  an  economic 
remedy  for  both  economic  and  political  afflictions. 


THE  HIGHWAY  TO  SOLUTION      265 

Apparently  this  is  what  our  government  plans, 
and  what  Mexico's  government  will  not  bring  her- 
self to  accept. 

Years  of  observation  of  the  Mexican  problem 
has  led  to  the  conviction  that  the  international 
difficulties  of  Mexico  are  between  the  Mexican 
politicians  and  the  American  government — their 
interests  decidedly  conflict.  But  there  is  no  divi- 
sion of  interest  between  Mexican  business  men  and 
American  business  men;  the  former  are  just  as 
disturbed  over  the  confiscatory  policies  of  the  Con- 
stitution of  1917  as  are  the  latter.  So  recently  as 
April  7,  1921,  a  petition  was  sent  to  President 
Obregon  by  a  group  of  landowners  in  the  Mexican 
state  of  Jalisco,  protesting  against  the  enforce- 
ment of  the  rulings  of  the  "National  Agrarian 
Commission"  which  confiscated  their  properties  in 
the  name  of  the  "social  revolution "  under  the 
same  Article  27  which  attacks  foreign  property 
rights.  Its  words  are  worth  recording  as  an  in- 
dication that  it  is  not  alone  the  American  business 
man  who  feels  the  pinch  of  the  rule  of  privilege 
in  Mexico. 

"Such  commissions,"  the  petition  reads,  "are  noth- 
ing more  than  partisan  centers  where  laws,  reason  and 
justice  are  mocked. 

"This  atrocious  work  will  be  judged  by  public  opinion 
as  soon  as  the  deep  and  serious  damage  which  has  been 
done  is  known,  and  history  will  in  time  establish  the 


266  TRADING  WITH  MEXICO 

responsibility.  Suffice  it  to  say  that  in  every  case  it  has 
been  a  work  of  destruction  and  never  of  construc- 
tion. .  .  . 

"The  local  agrarian  commission  is  inventing  fantastic 
plans  of  taxation,  confiscating  large  and  small  properties, 
and  sugar,  mezcal  and  orange  plantations,  which  have 
cost  their  legitimate  owners  years  of  toil  and  the  invest- 
ment of  considerable  capital.  The  federal  tribunals,  deaf 
to  all  appeals,  follow  an  invariable  line  of  conduct  in 
every  case  against  the  landowners.  Should  the  land- 
owner invoke  in  his  behalf  the  same  doctrines  which  have 
been  applied  to  the  benefit  of  others,  he  finds  out  that 
these  same  doctrines  are  never  interpreted  in  his  favor. 
The  authorities  only  favor  those  they  wish  to  favor  and 
to  accomplish  this  end  they  do  not  hesitate  to  override 
justice  and  reason." 

It  is  to  this  Mexican  business  man,  still  a  stable 
factor  in  Mexico,  that  we  must  look  for  the  change 
in  government  attitude  toward  business  which  is 
indispensable  to  the  solution  of  the  social,  eco- 
nomic and  political  chaos  of  Mexico  to-day.  In 
numbers  these  Mexican  business  men  are  few;  in 
grasp  of  world  affairs  they  lag  behind  men  in  sim- 
ilar positions  in  this  country.  Nevertheless,  their 
interests,  those  of  the  American  companies  now 
operating  in  Mexico  and  those  of  the  AmericanSs 
and  other  foreigners  who  hope  to  share  in  Mexican 
trade,  are  and  will  be  one.  It  is  in  the  way  of 
supporting  such  Mexicans  in  their  efforts  to  influ- 
ence the  government  of  their  own  country  that  I 
speak  of  an  economic  remedy  for  all  the  afflictions 


THE  HIGHWAY  TO  SOLUTION      267 

of  Mexico.  I  would,  if  I  could,  put  them  in  con- 
trol, would  bring  back  to  their  aid  the  brains  and 
the  energy  of  the  exiles  who  belong,  in  one  way  or 
another,  to  their  class  of  producers. 

It  is  to  such  an  end  that  the  foreign  business 
man  who  hopes,  in  the  immediate  or  in  the  dis- 
tant future,  to  share  in  Mexican  trade  should  turn 
his  hand.  He  should  demand,  in  the  councils  of 
his  government,  in  the  congress  of  the  country,  in 
the  powerful  conventions  of  chambers  of  com- 
merce, that  Washington  insist  definitely  on  a  re- 
turn to  civilized  and  economic  rule  in  Mexico. 
This  Washington  seems  to  seek  but  they  and 
they  alone  have  the  power  to  compel  the  deci- 
sion by  the  powers  of  this  world  that  the  day 
of  privilege  in  Mexico  must  be  put  aside,  and 
the  era  of  equal  rights  shall  dawn.  In  the 
hands  of  American  business  interests  the  tool 
of  pressure  is  very  powerful.  This  is  a  moment, 
not  to  rush  in  to  get  easy  markets  on  the  "ground 
floor,"  but  to  demand  conditions  which  will  give 
the  opportunities  and  the  profits  to  those  who  can 
best  use  them — the  truly  Golden  Rule  of  business 
the  world  around. 

When  that  day  comes,  all  will  profit.  Until  that 
day  comes,  none  can  have  aught  but  risk  and 
chance,  the  chance  of  the  gambler.  For  who  can 
say  how  the  wheel  of  politics  will  turn?  And  only 
he  who  knows  Mexico  and  the  Mexicans  of  old  can 


268  TRADING  WITH  MEXICO 

assume  that  lie  can  buy  his  way  to  privilege  with 
the  next  pirate  crew.  The  solution  is  in  the  hands 
of  American  business  men  because  it  is  in  the 
hands  of  the  Mexican  business  men  whom  they  can 
support  and  aid.  And  in  the  group  of  such  Mexi- 
can business  men  we  must  include  not  only  the  true 
Mexicans,  but  the  foreign  companies  which  have 
worked  long  in  Mexico  and  so  have  made  them- 
selves a  true  part  of  Mexico,  vitally  concerned  in 
her  progress  and  prosperity. 

Those  foreign  companies  of  Mexico  are  the 
business  world  of  Mexico.  And  they  know  Mexico 
and  her  needs  better,  in  many  ways,  than  Mexico 
knows  herself.  They  know,  as  every  one  who  is 
honest  with  himself  knows,  that  the  hope  of  Mex- 
ico is  in  truly  devoted,  native  government.  Yet 
we  still  see  them  pass  the  power  which  could  to- 
morrow restore  Mexico  to  the  family  of  nations 
over  to  those  who  use  it  for  their  own  ends  and 
for  the  utter  destruction  of  all  Mexico  that  is  out- 
side the  influence  of  the  oil  fields  and  of  their  civi- 
lization. 

The  great  companies  are  Mexican,  in  essence. 
They  have  rights  as  Americans  and  as  English- 
men, to  be  sure,  but  their  greater  right  is  in  Mex- 
ico. And  they  have  the  right  to  use  their  power  as 
they  will.  They  seek  to  be  good  and  to  be  honest 
and  just,  but  the  ends  of  justice  are  defeated  by 
their  very  honesty.  I  do  not  advocate  activity  in 


THE  HIGHWAY  TO  SOLUTION      269 

politics,  nor  even  the  tangible  aid  of  oil  companies 
to  revolutionists  of  any  stamp.  I  hold  only  that  if 
the  oil  companies  would  give  over  their  profits 
(as  they  did  temporarily  in  the  summer  of  1921) 
long  enough  to  shut  off  the  stream  of  gold  from 
corrupt  government,  if  they  would  thus  render 
revolution  and  loot  unprofitable,  the  solution  of 
the  problem  of  Mexico  would  soon  come,  in  a  re- 
turn to  an  age  of  honest  work  and  honest  govern- 
ment, free  from  the  temptation  of  vast  unearned 
wealth.  We  need  not  a/sk  how  or  by  whom  the 
change  shall  be  made,  whether  by  a  sincere  Mex- 
ican government  ready  to  cast  out  its  evil  elements, 
or  by  a  government  yet  to  be  born.  That  is  not 
our  concern,  for  our  concern  is  to  search  for  our 
part  and  having  found  that  part,  to  play  it  well, 

Is  not  this  a  solution  of  the  Mexican  problem? 
Should  we  not  say  to  the  foreign  companies : 

"You  are  in  Mexico,  you  are  of  Mexico.  You 
represent  all  that  is  stable  in  Mexico.  You  know 
those  Mexicans  who  can  solve  the  country's  prob- 
lems, and  make  Mexico  again  a  land  where  white 
men  can  keep  the  altar  fires  burning  bright,  where 
honest  Mexicans,  and  foreigners  if  they  wjll,  may 
help  to  make  it  all  that  it  should  and  must  be." 

Revolutionary  radicalism  has  run  its  course  in 
Mexico,  and  we  are  back  again  at  a  rule  of  capi* 
talism,  a  rule  which  capitalism,  for  right  or  wrong, 
cannot  longer  avoid.  The  eyes  of  the  world  are  on 


270  TRADING  WITH  MEXICO 

the  moneyed  powers  of  the  world.  It  is  childish 
to  try  to  deceive  radicals  or  conservatives  with 
saying  anything  else.  To-day,  in  Yucatan,  capi- 
talism (because  circumstances  have  forced  it  to 
do  so)  is  exacting  the  toll  of  penalty  from  the  hen- 
equen  industry  and  its  native  spokesmen.  To-day 
in  Tampico,  capitalism  hesitates  to  move  on,  and 
waits  for  the  ruin  which  will  tumble  about  it, 
forcing  it,  in  its  turn,  to  grind  Mexico  beneath  its 
heel.  Somehow,  dimly,  seems  to  emerge  the  lesson 
which  Mexico  has  for  us  and  for  the  world.  Cap- 
italism must  in  the  end  save  the  world  from  the 
ruin  of  revolution.  To-day  in  Mexico  it  can  move 
quickly  and  freely.  To-morrow  it  may  be  clutched 
in  the  very  destruction  which  is  upon  it,  and  be 
forced,  itself,  to  the  destruction  not  alone  of  the 
enemies  of  our  civilization,  but  of  the  fabric  of 
progress  of  that  civilization.  The  story  of  Yuca- 
tan is  written.  Is  the  story  of  Tampico  and  all 
Mexico  to  follow  the  same  plot,  and  is  the  world 
to  go  blindly  on,  believing  that  in  compromise  it 
shall  gain  strength? 

Truly  the  crimson  feast  is  preparing  for  the  vul- 
tures, and  vultures  will  our  eagles  of  business  be- 
come if  they  wait  longer  on  their  distant  heights 
for  revolution  to  finish  its  bloody  orgy.  To-day 
there  is  yet  time.  In  Mexico  there  is  yet  time. 
Why  wait  for  the  chaos,  from  which  there  seems 
but  one  emergence,  the  emergence  to  intervention 


THE  HIGHWAY  TO  SOLUTION      271 

and  blood  and  long  foreign  rule?  The  one  stable 
force,  the  wealth  of  Mexico,  must  choose  a 
nobler  course  than  that  waiting,  than  that  cyni- 
cal hoping.  It  can  choose  and  it  must  choose.  Old 
worlds  are  indeed  passed  away  and  the  paths  of 
new  stars  are  to-day  being  plotted.  In  the  courses 
of  those  new  stars  power  will  be  used  without  apol- 
ogy, as  the  revolutionary  radicalism  which  our  old 
civilization  created  moves  without  apology.  Our 
duty  is  to  the  future,  not  to  the  dead  past  of  com- 
promise and  convention  and  self-righteousness. 
Is  capitalism  honest  and  sincere  and  bound  up 
with  the  welfare  of  the  human  race?  Or  is  it  in- 
deed the  vulture  which  waits  to  feast  only  upon 
dead  bodies  amid  ruins?  To-day  in  Mexico  it 
waits  vulture-like.  Its  sincerity  and  its  true  right- 
eousness are  to  be  determined  not  by  slavish  wait- 
ing for  the  ruin  which  will  force  it  to  use  its 
power,  as  it  is  using  it  in  Yucatan,  but  by  its  mov- 
ing, to-day,  to  the  solving  of  the  great  problems 
of  a  great  nation  as  it  alone  can  solve  them.  Cap- 
italism and  not  revolution,  the  corporations  and 
people  of  Mexico,  and  not  foreign  pressure,  must 
in  the  end  give  answer  before  the  last  Tribunal. 


